CNBC – Jim Rogers: Play This Rally With Commodities

February 29, 2012

Jim Rogers , CEO and Chairman of Rogers Holdings

Published: Tuesday, 28 Feb 2012 | 8:59 PM ET
By: Michelle Fox
Producer

The Dow and S&P 500 may have hit their highest levels since 2008 on Tuesday, but Jim Rogers , CEO and Chairman of Rogers Holdings, is still staying away from stocks. Instead, he told “The Kudlow Report” he’s playing the rally with commodities.

“You see what’s happening to gold … Oil went down today, yes, but oil’s been going through the roof,” he said. “There are other ways to play. They’re printing a lot of money, Larry. When they print money, you have to protect yourself with real assets in the end.”

Rogers says things are “fine” right now because it’s an election year, not only in the U.S. but around the world, and that means governments are spending and printing money.  It’s the future he’s concerned about.

“Worry about 2013. Be panicked bout 2014,” Rogers said. “But this year a lot of good news is coming out.”

If President Obama wins the election, everybody’s going to say “Oh My God,” he said. If Obama loses, everyone is going to have to cut back because the president has “gone to excess” to try to win the election.

Right now, Rogers thinks it looks like Obama is going to win.

“I don’t want him to win. It’s not good for America. But it’s hard to defeat a sitting president,” he said. “And he’s spending a lot of money. Things are going to feel good this year just because he’s throwing money into the market and into the economy.”

© 2012 CNBC, Inc. All Rights Reserved

** Mr. Benson, Sign Drew Brees NOW!!

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Daily Reckoning: Yen Weakens to 80!

February 24, 2012

By Chuck Butler

02/22/12 St. Louis, Missouri – Well, the crazy things that have been going on with Japanese yen (JPY) finally seem to be unwinding… For anyone new to class, the Japanese yen has been one of the best-performing currencies the past couple of years, and not for strong fundamentals… The economy has been in a funk for over two decades, interest rates have been zero for so long now — I don’t remember when they weren’t zero — an aging population and government debt up to their eyeballs, but still the yen rallied…

But that appears to be over, giving credence that the only reason yen was so strong for so long was that it was still considered to be a “safe haven” currency. Well, with the latest agreement in the eurozone, I’m sure a lot of those “safe haven” trades into yen are being unwound, from the looks of it, I should say. So for the first time since July of last year, yen is trading with an 80 handle…

The euro (EUR) remains above 1.32 this morning… but has found the waters quite rough as it attempts a run at 1.33, and just like a couple of weeks ago, when we saw the euro bounce around 1.32-1.33 and never really climb past 1.33, the markets will grow tired of this trade, and soon the euro will begin to slide again. That is, unless it can get some strong legs and move past 1.33. Personally, I would be happy to see the euro remain around 1.32, for now, and see where the baby steps of stabilization for the eurozone go from here…

In the 1980s here in St. Louis, the world-famous rock radio station, KSHE, used to run a TV ad that had a father break into air guitar when the Stones’ song “Brown Sugar” would come on, and the daughter would get all freaked out and say, “Mom… he’s doing it again.”

Well, I told you all that to set up… “Pfennig readers, China’s doing it again.” China announced last night that they had signed a new member to their club of countries that have currency swap agreements to remove dollars from the terms of trade. This time, China signed an agreement with Turkey. Yes, China is being coy with these smaller — in terms of world trade — countries, but that’s how they are going to spread their wings, and gain a wider distribution of their currency. And again, I sit here and tell you, dear reader, that China has plans to remove the dollar as the reserve currency of the world.

And maybe it won’t be the renminbi (CNY) that takes over… maybe the so-called reserve currency is a basket of major currencies. The point here, and I can’t emphasize this enough, is that to have the reserve currency title stripped from the dollar would be devastating to our economy… To you, me, our kids, our grandkids… Think about this, dear reader… after World War II, the pound sterling (GBP) could no longer be the reserve currency of the world. Because of the debts the U.K. built fighting the war, the U.S. became the financier of the world, and was the only country that had the ability to act as “settlement banks” and use dollars in the terms of trade…

Then gloom, despair and agony fell on the U.K. economy. So this is what the Chinese have in mind for us… and why are they doing this? They believe that the U.S. has broken their promise to the world to keep the dollar strong, which they can no longer do, given the debts, deficits, economy, scandals, unfunded liabilities and on and on…

OK, I’ve got to go on, because this is really depressing me this morning!

This morning, the euro was dealt a bit of a blow by a worse-than-expected manufacturing index report for this month… remember, these manufacturing index reports are called “PMI.” So the eurozone PMI came in at less than 50, at 49.7. In addition, remember that any number below 50 represents contraction of the manufacturing sector. I find this report to be interesting, given that there appears to be a strong economy in Germany. But even with Germany representing the largest economy of the eurozone, there are many more countries in the eurozone that are not experiencing economic strength.

In the U.K., the latest Bank of England (BOE) meeting minutes showed that two members voted for additional bond purchases greater than what was implemented. I’m surprised at how the markets slammed the pound after the printing of this report… Silly markets… fickle markets… It’s just two votes… But the real point here is that we have to keep our eye on the ball, as I’ve explained several times over the past few years, and that is that what happens in the U.K. ends up on our shores about six months later… The BOE implemented another round of QE last month, so the clock has started…

The Aussie dollar (AUD) is still gasping for air, after having the wind knocked out of it by the RBA meeting minutes… We talked about this yesterday, but for those that missed class yesterday, the RBA added some wording in their latest meeting minutes that surprised the markets. The RBA kept their foot in the door of more rate cuts. Of course, they didn’t say they would cut rates, they simply said they “had the scope to do so, should the economy weaken”…

So as I said yesterday, we saw this same type of trading after a RBA rumor about three months ago, and it took the A$ a few days to get its wind back. I think it may get its wind back when the markets get a drift of the latest Wage Cost Index for the fourth quarter, which printed stronger than expected!

As I look at the currency screens this morning, most of the currencies are moving in the wrong direction, but not by much, just an underlying bias to buy dollars this morning. And gold, which had a very strong performance yesterday, is off about $5 this morning, as it appears some profit taking has taken over.

The price of oil didn’t take a step back, though. The oil price is up another $1, to $105, and knocking on the door to $106… I stopped to fill up my gas tank this morning… and much as the way groceries, restaurants and so on are doing… I got less and paid the same… This way, most of us don’t really feel the inflation all around us, but it’s there… trust me. No wage inflation or home inflation, but everything else that touches our lives… and as long as everything else around us is going up in price or going down in the quantity at the same price (it’s the same thing), it would be OK to see some wage inflation, eh?

China also printed a weaker manufacturing index (PMI). The preliminary report from HSBC Holdings shows that China’s PMI was 49.7, again below 50. This is all a part of the “moderation” of the Chinese economy, folks… nothing to be really concerned about yet, so move along, these are not the droids you are looking for…

Well, it looks as if the U.S. isn’t the only country that didn’t experience a grand Christmas shopping season. Retail Sales in Canada too, came in much weaker than previous months… December Retail sales for Canada slipped 0.2%, following increases of 0.4% in November and 0.8% in October! So maybe everyone shopped early? December was the first drop in five months for Canada, and a look under the hood (pun intended) showed that motor vehicles were to blame for the drop. So let’s not write the Canadian economy off just yet…

One European currency, the krone, (NOK) that’s bucking the trend of following the euro today, and in my opinion, it’s about darn time! The Norwegian krone is rallying nicely this morning. You might recall me bemoaning the fact that the krone was following the euro, even though Norway had sterling fundamentals and should be held to a different standard. Well, maybe that’s happening, finally! The krone is the best-performing major currency this month!

After cutting rates in December, the Norwegian central bank, the Norges Bank, might just be sitting on its hands going forward, as speculation of another rate cut fades… All this fading speculation is really pushing the krone… I wonder how long this will last? Does it have legs? Is it on terra firma? I guess we’ll have to wait and see, but in my opinion, it should be OK! Of course, just because I say that, I need to make sure you understand that it’s just my opinion, and I could be wrong!

I saw a cartoon on Ed Steer’s excellent morning Gold & Silver Daily this morning… It shows the president holding a dollar bill that’s on fire, and he says, “Look, Green Energy!” If it weren’t so true, it might be funny, eh?

Not much in the way of data from the data cupboard this morning here in the U.S., just existing home sales for January… The thing to look for here is not the homes sold, but at what price? Did the median price decline as it has for a couple of years now? That’s what to look for…

Then there was this from The Economist:

“The European Union has lower government debt levels than America. Gross government debt in the 27 nations of the EU was 80% of the region’s GDP at the end of 2010; in America, gross federal debt at the end of 2010 was 94% of GDP. Furthermore, government debt is growing more slowly as a percentage of GDP in the EU than in America, because pretty much every nation in the EU is implementing austerity measures. The general government deficit in the EU-27 in 2010 was 6.6% of GDP. In America, the federal deficit in 2010 was 9% of GDP.”

I tell you this not as a “hey, they’re better than us” type of thing. This article caught my eye, because we’re going to hear over and over again during the election campaign that we are “becoming Europe” because of the debt. But if that were true, then we as a country would be cutting deficit spending, and implementing austerity measures… watch out for that!

To recap… Yen finally surrenders to intervention and reduction of safe-haven flows. China signs another member to their currency swap club. Oil climbs further. Gold has strong performance yesterday followed by some profit taking today. The A$ is still searching for some wind, after having it knocked out of it by the RBA minutes on Monday, and maybe, just maybe, Norway is breaking the trend to follow the euro…

Chuck Butler
for The Daily Reckoning


Forbes: Gasoline Prices Are Not Rising, the Dollar Is Falling

February 23, 2012
Louis Woodhill, Contributor
I apply unconventional logic to economic issues.
Op/Ed|2/22/2012 @ 1:12PM

Panic is in the air as gasoline prices move above $4.00 per gallon. Politicians and pundits are rounding up the usual suspects, looking for someone or something to blame for this latest outrage to middle class family budgets. In a rare display of bipartisanship, President Obama and Speaker of the House John Boehner are both wringing their hands over the prospect of seeing their newly extended Social Security tax cut gobbled up by rising gasoline costs.

Unfortunately, the talking heads that are trying to explain the reasons for high oil prices are missing one tiny detail. Oil prices aren’t high right now. In fact, they are unusually low. Gasoline prices would have to rise by another $0.65 to $0.75 per gallon from where they are now just to be “normal”. And, because gasoline prices are low right now, it is very likely that they are going to go up more—perhaps a lot more.

What the politicians, analysts, and pundits are missing is that prices are ratios. Gasoline prices reflect crude oil prices, so let’s use West Texas Intermediate (WTI) crude oil to illustrate this crucial point.

As this is written, West Texas Intermediate crude oil (WTI) is trading at $105.88/bbl. All this means is that the market value of a barrel of WTI is 105.88 times the market value of “the dollar”. It is also true that WTI is trading at €79.95/bbl, ¥8,439.69/barrel, and £67.13/bbl. In all of these cases, the market value of WTI is the same. What is different in each case is the value of the monetary unit (euros, yen, and British pounds, respectively) being used to calculate the ratio that expresses the price.

In terms of judging whether the price of WTI is high or low, here is the price that truly matters: 0.0602 ounces of gold per barrel (which can be written as Au0.0602/bbl). What this number means is that, right now, a barrel of WTI has the same market value as 0.0602 ounces of gold.

During the 493 months since January 1, 1971, the price of WTI has averaged Au0.0732/bbl. It has been higher than that during 225 of those months and lower than that during 268 of those months. Plotted as a graph, the line representing the price of a barrel of oil in terms of gold has crossed the horizontal line representing the long-term average price (Au0.0732/bbl) 29 times.

At Au0.0602/bbl, today’s WTI price is only 82% of its average over the past 41+ years. Assuming that gold prices remained at today’s $1,759.30/oz, WTI prices would have to rise by about 22%, to $128.86/bbl, in order to reach their long-term average in terms of gold. As mentioned earlier, such an increase would drive up retail gasoline prices by somewhere between $0.65 and $0.75 per gallon.

At this point, we can be certain that, unless gold prices come down, gasoline prices are going to go up—by a lot. And, because the dollar is currently a floating, undefined, fiat currency, there is no inherent limit to how far the price of gold in dollars can rise, and therefore no ultimate ceiling on gasoline prices.

Federal Reserve Chairman Ben Bernanke uses a “core CPI index” that excludes food and energy to guide monetary policy. From Big Ben’s point of view, rising gasoline prices are not a problem. For the rest of us, they are becoming a big problem.

Over the centuries, gold has been “the golden constant”. Eventually, all prices equilibrate with gold. This is why gold represents the best available standard in terms of which to define the value of a monetary unit. Forty-one years ago, when the value of the dollar was defined in terms of gold at $35/oz, WTI was selling for $3.56/bbl.

Right now, the threat posed by rising gasoline prices is not just to family budgets. An even greater danger is that the government will use escalating oil prices as an excuse to do something stupid.

After President Nixon abrogated the Bretton Woods monetary arrangement in stages starting in September 1971, both gold prices and oil prices started to rise. The government responded by imposing wage-price controls. This made a bad situation much worse.

Continued on Pg. 2

China’s Voracious Hunger for Gold

February 22, 2012

China’s appetite for Gold mirrors the old adage on Chinese take-out: No matter how full you may be now, wait two hours you will be hungry again.  A little over a decade ago the Chinese  government deregulated the purchase of gold. Since then China, the largest producer of gold, has grown to become a deficit consumer. The Hong Kong exchange alone demands more gold than the 321 tons produced last year domestically.

The talking heads vary on their opinions on how this will affect the global gold market. Some claim it will bring massive shortages in the coming years as China acquires more tonnage in the coming decade. While others shake this off as nothing more than the Central Bank of China (CBOC) anomaly of shoring up its banking through its gold holdings.  We think that both are correct to a varying degrees. Yet, we tend to cling to the middle ground that China both privately & through the CBOC will continue to add pressure to the price of Gold based on demand.

Much like oil demand is greatly increased by the consumption of the growing Chinese industrial revolution. Gold will continue to see price pressure as demand ebbs and wanes in China. As no surprise to any, China is growing into a power-house economically that will continue to affect global markets, including Gold.


China to the Rescue of Euro – Boosts Gold

February 15, 2012

Chinese central bank governor Zhou Xiaochuan

Much like last summer when Gold rose and fell with every changing wind of the US Dept crisis, this winter Gold is clinging to every shift of the EU Debt crisis. In a not so surprising move China’s central bank governor Zhou Xiaochuan said on Wednesday, The People’s Bank of China has always maintained close cooperation and contacts with the European Central Bank, and we support each other in many policy aspects. The PBOC firmly supports the ECB’s recent measures to address the difficulties. In other words, China will continue to buy up cheap European debt as a continuation of their move to become the worlds debt collector.

China’s commitment boosted gold in early trading today pushing the yellow metal up 1%. Gold continues to trade in the $1,700’s and should continue to for the near future.  This makes gold a buy as it nears the $1,715 price and hold closer to $1,775.  The next major move in gold should come once any details are released after the finalization of the EU Debt agreement.

Still in the minds of most investors is the impending move by the Fed to start QE3 before the end of this election cycle. Over the last month Fed Chair Bernanke refused to rule out firing up the printing presses to fuel the downward trend of the Dollar. Bernanke may be getting nervous that the Dollar is strengthening too much during this current Euro crisis and will want to put on the brakes. All of this should send the price of gold higher in the coming months.

Now would be a good time to start or reinvest in your tangible asset portfolio, making sure you are at a conservative 10% to aggressive 20% of your net investments. This will provide the financial insurance needed to weather the coming economic storms on the horizon.


CNBC – Uptrend in Gold to Continue; Next Target $1,880: Charts

February 9, 2012
Published: Tuesday, 7 Feb 2012 | 6:15 PM ET
By: Daryl Guppy
CNBC Contributor

The gold price has been historically influenced by three main factors – currency hedging, jewelry demand and central bank activity. To these factors we add a fourth – the activity of Exchange Traded Commodity Funds.

The use of gold for currency hedging goes hand in glove with central bank buying activity. When fiat paper currencies are under threat then gold is the instinctive hedge. Investors worried about holding euros, and also worried about the weakness in the U.S. dollar start buying gold. The developing weakness in the euro, and the potential collapse or restructuring of the euro zone, is the main driver behind the current gold rally.

There has been an increase in demand for third party exposure to the market. This is provided by the Exchange Traded Commodity Funds. The Exchange Traded Funds now account for a significant proportion of gold trading activity and their investors are not motivated by the same concern as professional traders or gold industry participants.

Underpinning this investment behavior is the consistent buying by central banks as they seek to build reserves to protect their currency. In 2010 and 2011 central bank buying provided a firm foundation for the prolonged uptrend. There is no evidence to suggest that central banks will become sellers in the near term future so this up trend support remains in place. This combination of factors has created a strong and sustainable uptrend in gold.

The weekly COMEX  [GCCV1  1747.50    16.20  (+0.94%)   ]gold chart shows a strong trading channel. Starting in 2010 April the lower trend line defines the lower edge of the trading channel. The upper edge of the trading channel is confirmed in May 2010. The current rebound rally starting from near $1,570 uses the lower trend line as a rebound point.

Between May 2010 and July 2011 the gold price moved in a rally and retreat pattern inside the trading channel. The strong breakout above the upper edge of the trading channel developed in July 2011. After the peak near $1,924 in September 2011 the gold price developed a new downtrend. In October and November 2011 the upper edge of the trading channel acted as a support level. The rebound rally in October provided the anchor point for the new downtrend line.

The rebound rally that has developed from the December 2011 low near $1,560 has two important features.

The first feature is that the rally has moved above the upper edge of the trading channel near $1,720. The second feature is that the price has also moved above the value of the downtrend line, which also has a value near $1,720.

This breakout above two important resistance features is very bullish. The first upside target is near $1,800. This is the peak of the November 2011 rally and it is a weak resistance level.

The width of the trading channel is calculated and this value is projected upwards to provide the second breakout target. This is near $1,860 but there is a high probability the price will use the previous resistance level near $1,880 as a target level.

The long established pattern of trend development inside the trading channel suggests that any breakout towards $1,800 and $1,880 will have the characteristics of a rally rather than a sustainable trend. This provides short term trading opportunities. In the longer term the gold price may return to trading inside the trading channel.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders –www.guppytraders.com . He is a regular guest on CNBC’s Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.

If you would like Daryl to chart a specific stock, commodity or currency, please write to us at ChartingAsia@cnbc.com. We welcome all questions, comments and requests.

CNBC assumes no responsibility for any losses, damages or liability whatsoever suffered or incurred by any person, resulting from or attributable to the use of the information published on this site. User is using this information at his/her sole risk.

© 2011 CNBC, Inc. All Rights Reserved


Phillip Coggan discusses Paper Promises: Debt, Money, and the New World Order

February 8, 2012

Philip Coggan a columnist for the Economist who has written extensively on hedge funds has taken an in-depth look at the fiat currency system we live in today.  The idea for his current book, Paper Promises: Debt, Money, and the New World Order, came out of his research into the 2008 crash & the ensuing recession.  Coggan discusses the history of debt and its relationship to paper money, now the trend towards electronic money. He is like a prophet in the wilderness using history, current trends & a bit of common sense to forecast the coming decade of impending financial collapse.

We don’t often have video or audio links on this blog but both of these interviews are worth listening to. This is a warning that should be shouted from the mountain tops!

The following links are two separate interviews on the book:

NPR Morning Edition: Amid Debt Crisis, A Trail of Broken ‘Promises’

The Economist: The Debt Crisis – Philip Coggan on ‘Paper Promises’