Mercy! Last week was a ride. Friday saw 1,000 point swing in the DOW and it looked like the sky was falling, and I'm not talking rain.

But the wonderful thing is that the markets continue, in spite of government interaction which scares me. Who in their right mind wants the US Government to become a part owner in banks? Let alone banks that are healthy.

Well, enough of that rant. Right now with the DOW and performing well in this market bounce, gold fell over it's weekend high. At the moment it's trading at $838 so it's moving up as the day's close draws near.

Here's some interesting news items I stumbled across this morning:

Austria witnesses new gold rush

The interest in gold coins is so great that many of the world's major mints are struggling to keep up with demand, including the Austrian Mint, which produces the Vienna Philharmonic - one of the best-selling bullion coins worldwide.

Sales of Vienna Philharmonic gold coins have gone up by more than 230% since last year.

 

All Eyes on the U.S. Dollar

Capital Gold Announces Record Gold Production at Its El Chanate Mine

And I thought this blog entry cool because it features some pics from the latest Mining Expo in Vegas.

Our lust for metal is great.

1. We all agreed that it was hands down the coolest trade show any of us have EVER attended.  Sign up now for the next one in 02012 and give yourself two days to see it all.
2. It is amazing to me that - with the exception of Greg’s stuff - that there was basically no robotics on display there.  This is bizarre for an industry that has huge labor costs and the most dangerous work environment in the world.
3. The machines we build to extract metals and minerals from the earth are the most terrifying machines in the world.

Until next time. Be sure to check out the free real time market price widget ExactPrice for gold, silver, and platinum.

I spent most of today away from the computer and the market news. I was even away from the tv or radio news. But what I did have the opportunity to do was interact with people on "main street" and over all there is worry about the financial crisis and what it means in the long run.

Talk of recession and even depression came up. Anger over things like AIG's spa trip was one of the sore spots for a more than a few. And of course just who could solve this problem as a President kept coming up. As if one person could solve this mess.

All I know is that precious metals look more and more like a good investment. I've heard some talk of shorting gold because it's volatile and one can make some quick cash.

It's 9:34 PM Eastern and right now the free widget ExactPrice is $905.70. That's down from it's high today which I think was $910.10. Will it go higher. Yeah I think so. The governments around the world look like they are all printing paper money to buoy up the banks.

Speaking of which did you see this article:

More banks will fail, Paulson says

I found this article by David Chapman very informative:

THE FINANCIAL PANIC OF 2008

Financial panics have been around at least as long as organized economies. The first recorded panic in modern economies was in 1819. At its heart was a failure of the banking system following the War of 1812. It was preceded by a change in monetary policy caused by heavy borrowings to finance the war, and the monetary expansion in turn spurred an expansion of banks and bank notes. The resulting speculative investment led inevitably to collapse, with bank failures, bank runs and bankruptcies....

....A common theme in all depressions is massive bank failure. Great depressions are all about a collapse in the banking system and debt implosion. We (and many others) had constantly noted that this time would be no different, and that the massive debt build-up of the past two decades along with the proliferation of new instruments and derivatives was going to end in a disaster. The disaster is now unfolding, and the panicky body language of people such as Henry Paulson and George W. Bush is obvious. Fed Chairman Bernanke is trying to act coolly but even he now seems out of his depth as would we suspect most if not all of us.

Check it out. The article features some charts looking at past financial crashes and causes.

I got a kick out of this blog post:

How to Ruin the U.S. Economy
by Ben Stein

1) Have a fiscal policy that creates immense deficits in good times and bad, burdening America's posterity with staggering burdens of repaying the debt.

Oh and get this:

Mint Widens Freeze on Gold Coin Sales

People are reacting to the market and fear is building on the street. And here's one evidence:

More People Buying Safes

Well, tomorrow is a new day and perhaps it will be laced with opportunity. I'm sure it will. We just need to keep our eyes open.

We were getting to the point have having two banks on every street corner.  Extremely happy the bill failed today.  Extremely optimistic about the future of the country as long as the bill continues to fail.  Extremely proud of the congresspersons that said no to their leaders and especially the morons Bush, McCain, and Obama.  Maybe the country has a future after all.

Watch Jim Rogers and Peter Schiff videos on youtube.

What did I do today?  Buy stocks. 

I truly think ultimately what caused this mess is or was the federal reserve.  The reason is they dickered with interest rates.  As soon as Republicans get elected long-term rates should rise to about 6-8%.  The reason they support running deficits around 5%.  Then they have a nerve to lower interest rates.   Support HR 2755 to abolish the federal reserve.  Without these fed adjustments, homes would go to their true value and the housing and auto markets would become very stable.

Here are several links to items I found of interest today in my reading while I watched the precious metals react to the market losses. I use the free real time software widget from Lear Capital for tracking those markets.

Confessions of a Market Convert

Let’s start with a little disclosure.

I have a confession to make, and it’s a bit embarrassing, because any time you change a long held opinion, friends, relatives, associates and acquaintances are sure to take issue. So be it. In the interest of everyone being in the know, here it is:

I am now a bull.

I always like watching this guy in the morning as he does a short Youtube video on the day's market open:
Trading for the Masses

I see little to do in an environment that the rules are changing on the fly, so we have pushed to the sidelines to wait for the dust to settle some. Trades will be there, we just don’t see the easy trades right now, so we will wait for the setups to return!!

And I found this commentary on Bloomberg worth reading for it's not of history in the Fannie and Freddie vein:

How the Democrats Created the Financial Crisis: Kevin Hassett

Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission's chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie's position on the relevant accounting issue was not even ``on the page'' of allowable interpretations.

Gold has been doing well this week as I watch it with ExactPrice.

I was thrilled last night to go to bed and watch it get close to $900. I was pretty sure that it would break that over night, but I was wrong.

However it was nice to see that it did break $900 during trading today.

Not so cool though is that it dropped from that when the DOW rallied on news that Paulson was entertaining thoughts of what amounts in my mind to more government bailouts.

Here's the news on that:

Dow Surges 410 on Bailout Hopes

The late-day rally was sparked by various reports that Paulson has been shopping around the idea of creating a modernized version of the Resolution Trust Corporation, an entity was used for banks' bad assets during the S&L crisis in the 1980s. The idea of a bailout sent financial stocks soaring, eventually closing the day nearly 8% higher.

In the long term I think this will be good for gold and silver because it's just going to lead to a weaker dollar. But I have to say that it greatly disturbs me that more bailouts are coming.

Man, all the precious metals are taking a hit today. I was looking at the yearly charts on the free widget ExactPrice and I note that the gains over the past year have been almost all lost. Except for Silver which is actually lower.

That said I thought these two articles were interesting and worth checking out.

Can Gold Be Suppressed Indefinitely?

snippet:

"It seemed obvious to me, as it does to many of the writers lobbing
missives into the blogosphere on the subject, that the continuous
printing of currency would cause a proportional devaluation of said
currency in line with the excessive representation of ersatz wealth it
theoretically should be backing. And that’s the bottom line for a
currency, isn’t it?"

and:
Go for Gold

snippet:

"All in all, it has not been a pretty picture, but I have reason to
believe that the outlook for the next 6-12 months is even more
pessimistic. Fortunately for us, when there’s blood on the street,
there’s opportunity to make money, and I think we are entering a
period of truly fantastic profit potential. First, let’s take a look
at why I carry such a pessimistic view for the near and intermediate
terms."

This is a follow up to my article on "How to Spot the Trends".  Well it seems like the trend is to now buy gold stocks.  All of the best managers here in Canada have moved into gold stocks and energy services.  Peter Hodson of Sprott Asset Management, in his June commentary, said he believes gold is the best call he can make right now.  David Taylor of Dynamic Funds has sold a lot of his energy stocks and moved heavily into gold and energy services.  And last, but definitely not least, is Andrew Cook from Marquest Asset Management.  His fund is up 50% over the past year and has been generally kicking ass with a 50%+ annualized return for the past 3 years.  In his June 27 commentary, he said he believes during this high oil price and poor financial liquidity environment, gold stocks will rally.  Perhaps even more impressive is his market timing skills.  In that commentary, he said he had up to 40% cash because he expected a correction which would be a significant opportunity to re-buy right before the next rally.  And guess what?  We've had a nice correction over the past week!  Not only that, but gold stocks have already started to rally just like all those experts have said above.

I personally expect (hope) the correction to continue a bit more and hopefully I can buy some stocks that are on my list.  This was why I raised some cash a couple of weeks ago.

A lot of experts, including Charles Oliver at Sprott Asset Management, seem to think silver is going much higher.

"That is the time to buy," he said. "I am not sure how high it could go, but I wouldn't be surprised to see it at $22 or $23 by the end of December."

Silver is used in jewellery, but has varied industrial uses, including in electronics equipment. Like many silver bulls, Mr. Christian predicts a big price driver will be rising investor demand for the metal as a "safe haven" because of concerns about inflation, the devaluing U.S. dollar and the global credit crisis.

The recent pullback in price, meanwhile, stems from some industrial users reducing inventories in the face of higher costs, while investors have been taking profits after a strong runup.

David Morgan, a U.S.-based precious metals analyst and writer of resources newsletter The Morgan Report, recommended his clients take some money off the table in March.

"I love silver, but let's be realistic," said Mr. Morgan, who is also founder of Silver-Investor.com. "These things can get over exuberant."

"I see a bottoming process [for the metal] between June and August," he added. "By the end of the year, I see gold over $1,000 per ounce, and silver back over $21 an ounce. I think the fourth quarter is going to be very strong for metals."

Gold for August delivery closed up $13.20 yesterday at $886.30 on the Nymex.

Mr. Morgan's bullish case for silver stems partly from the declining supply of above-ground, investable supplies of the metal as governments such as that of the United States have sold off their stockpiles.

Silver stocks, which he likes and owns, include: Pan American Silver Corp., with a two-year target of $50 (Canadian); Silver Standard Resources Inc., with a two-year target of $40); and Silver Corp., with a two-year target of $16. Among the juniors, he likes Minco Silver Corp., with a two- to three-year target of $5.

Evidence of rising investor demand has been the popularity of the iShares Silver Trust, an exchange-traded fund launched in 2006 and which is now backed by more than 190 million ounces of bullion.

Silver has also attracted wealthy investors like Microsoft Corp.'s chairman Bill Gates, whose Cascade Investment LLC is the third-largest shareholder of Pan American Silver. Billionaire investor Warren Buffett's Berkshire Hathaway bet heavily on silver in 1997, and bought 130 million ounces, but he has alluded to selling this investment by 2006.

Nick Barisheff, president of BMG Management Group Inc. in Toronto, expects silver to rally in the fall because of seasonality patterns tied to the wedding season in India.

"Gold and silver are a big part of dowries," said Mr. Barisheff, who runs the $189-million BMG Bullion Fund, which invests equally in gold, silver and platinum. "My view is that silver will be above $21 (U.S.) by the end of the year."

Silver soared as high at $50 an ounce in January, 1980, when the Hunt brothers of Texas tried to corner the silver market. But that spike only lasted a day, and the average price for silver that year was about $21 an ounce.

Charles Oliver, an investment strategist with Sprott Asset Management Inc. in Toronto, is forecasting silver to reach $40 and gold to hit $2,000 an ounce in four years.

The price target stems from calculating that gold historically trades at a 50-to-1 ratio to silver, even though those numbers can get "out of whack, periodically," he said.

He oversees the $614-million (Canadian) Sprott Gold and Precious Metals Fund, which has 9 per cent of its assets in silver bars and another 20 per cent in silver stocks. He currently likes Hecla Mining Co. and Silver Wheaton Corp.

"We are probably at the higher end than some of our [equity] competitors" in terms of a weighting in silver, he said.

Ned Goodman, lead portfolio manager at Dynamic funds, is another phenomenal investor here in Canada.  In an article in the National Post last month, he doesn't think oil and commodities are in a bubble.

"First of all I'm an optimist," said Ned, who's a friend of mine, in his opening remarks. "That's because I've never met a rich pessimist."

The Dundee/Dynamic family of funds have outperformed most and their portfolio managers are all top-ranked, both in Canada and internationally. For instance, Rohit Sehgal, Chief Investment Strategy guy at Dynamic, was ranked the world's second smartest hedge fund manager this year by Barron's. He runs its Dynamic Power Hedge Fund and lots of other stuff.

What's best about attending such an event as this, apart from flying on a private jet with Ned to get there, is the collection of brilliant investment nuggets that are pure gold to investors. So here are a few gathered from the speakers this afternoon:

• "The bull market in commodities will last for another decade," said Ned.
• Oil at $130 a barrel is "not a bubble" because commodity prices are being driven by international supply and demand realities.
• Three game-changing companies, identified by Adam Domsky of Dynamic's Focus funds, are: Apple ($21 a share in cash, no debt and only 1% of cellphone market); Roche Group of Switzerland which is concentrating on cancer cures not bandaid pharma treatments and Wal-Mart Stores Inc., which is undervalued because it benefits from the slowing U.S. economy as well as 4% share buyback announcement.
• Three themes investors should keep in mind for at least the next ten years: FOOD (staples and healthcare); SHELTER (infrastructure, engineering, materials) and ENERGY.
• The credit crisis is not over yet, more writedowns, so it's too early to buy "financials" like banks and other intermediaries.
• Top 10 stocks in Dynamic's "growth" portfolio: RIM; Potash; Agrium; Petroleos Brasilia; Duvernay Oil; PetroBank Energy; Reliance (India's largest conglomerate); Niko (junior exploration in partnership with Reliance in the world's largest gas discovery); Suncor and Pacific Rubiales Energy.
• Outlook for gold is a steady annual increase of US$100 an ounce indefinitely because of supply-demand factors, said Rob Cohen, the group's mining analyst.
• Oil will be "bullish for 30 to 60 days", there will be volatility in the price and natural gas prices will increase dramatically on a global basis, said its oil analyst Andrew Taylor.

Inflation fears are overstated, said many speakers, because the brake on it is the deflationary factors such as collapsed housing prices in the U.S. as well as the continuing flood of cheap exports out of Asia to the rest of the world, thus lowering living costs.

"There will be inflation for some time. It's not like the 1970s, but there will be continuous inflation because of the rise in commodity prices," said Ned. So it's time to pick stocks, rather than rely on indices to rise.

Chris Laird has a very, in my opinion, common sense point of view in this article about the coming fuel shock.  He talks about rising, out-of-control inflation which will force central banks to increase interest rates in an environment where the economy is not growing, and food/oil costs are significantly higher.  A "poisonous combination" indeed.  His conclusion is that rising world inflation will cause the gold market to switch its focus to inflation, thus oil and gold will be higher in a year.