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HOUSE OF SAUD STARTS TO UNRAVEL - OTHER DEATH KNELLS FOR THE DOLLAR & THE POTENT REASONS GOLD'S SET TO EXPODE HIGHER


Posted by by Jim Willie CB Editor of the “HAT TRICK LETTER”

on Thursday, 27 September 2012 11:04

More loyal Jackass wannabee followers will recall a story (repeated often) that on the Easter Sunday weekend of April 2010, a secret gathering of over 200 Arab billionaires convened in Abu Dhabi. They arrived in unmarked jets. My source was one of only two or three white faces in the crowd, invited by his clients. One result of the meeting was an accord struck between the Persian Gulf oil producers, led by the Saudis, to work toward a pact with Russia and China as protector of the gulf in return for financial cooperation, economic construction, and forward progress. The implicit message was that the Untied States would be phased out in the protectorate. In the balance would lie the Petro-Dollar defacto standard as victim. Events continue to this day in movement toward that end.

However, since the Syrian uprising, a new lethal element has entered the mix. Account will be kept brief, since so volatile and controversial. Just some bare notes. The Assad family in Syria has suffered some assassinations. Apparently, the Saudis had a hand in the killings. HezBollah has vowed retaliation. Their ties to Iran might be longstanding, but perhaps are exaggerated. My view is their home is in Lebanon. In August, Prince Bandar was assassinated. He was the Saudi head of security, and long-time ally to the USGovt. The Saudi regime is concealing his death, with outdated photos and false statements. They are working toward a transition. The House of Saud has been unstable from threats to the south in Yemen. It is unstable from internal threats tied to the fundamentalists. Although cooperation and respect has been shown between Riyadh and Tehran, the Bandar hit has created an entirely new environment. The Saudi regime with high likelihood is in its final months.

More importantly, the Petro-Dollar is losing its all important Saudi leg. Implications are vast. The US public takes the USDollar for granted, with almost no concept of FOREX exchange rates. If the House of Saud falls, when it falls, the impact crater will include the entire waistline of the USEconomy and its financial dog tail that wags it. The USGovt and its banker handlers have relied heavily upon the Petro-Dollar in general, and on the Saudis in particular, ever since Henry Kissinger signed an accord that governs over the grand surplus recycling back in the 1973-1974 era. Watch the Saudis convert USTBonds to Gold, then bug out of the desert to their new mansions in Southern Spain

The recent decision by the US Federal Reserve to contaminate the financial body until it responds favorably was the last straw in my book. Witness a declaration of permanent QE and hyper monetary inflation of the most virulent strain, unsterilized. The USFed is essentially admitting failure. The signal serves as the loudest death knell for the USDollar among many in a sequence. On a similar parallel note, lighter and more humorous, one might be reminded of the pirate swash buckling style of yelling at the swabbies that the beatings will continue until morale improves. The QE bond monetization of USGovt debt has turned viral and entrenched. It is sold as stimulus, when in fact it acts like a giant wet blanket on the USEconomy. It is intended as stimulus to businesses, but the effect is felt on the financial speculation and on Asian direct business investment. In the past the emergency lever device had been successful only because it was used on a temporary basis. But now the USFed high priest assures it is a permanent fixture, a sign of their failure. The public is too ignorant to comprehend the ruin. They can only see the threat to their personal ruin.

....read the following headlines HERECHINA AS INTERMEDIARY AGAINST PETRO-DOLLAR, MONEY VELOCITY,  MEXICO CUTS A DEAL WITH CHINA FOR OIL,  STRIKES HINDER GOLD OUTPUT, THIRD WORLD THREAT, GOLD PRICE READY TO EXPLODE UPWARD

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Energy & Commodities

Oil is Not Looking So Hot


Posted by The Mad Hedge Fund Trader

on Thursday, 27 September 2012 07:47

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I received another one of those scratchy cell phone calls from my friend in the West Texas oil patch. You could almost feel the dust coming through the ether. He said that while Ben Bernanke his committed to buying $40 billion a month of mortgage-backed securities as part of QE3, he has not promised to buy a single barrel of oil. This is bad for oil.

That means Texas Tea has to take the full brunt of collapsing demand caused by economies in free-fall like Europe, China, and Japan. There are no bailouts here. On top of that, Saudi Arabia wants to whip some discipline into its fellow OPEC members.

Saudi Arabia does this by permitting its own production to surge, dropping prices, and inflicting pain on recalcitrant cartel members, especially Iran. Around $80 a barrel is thought to be a price they would be happy with, some $15 a barrel lower than today’s price.

Last week rumors were rife of a “fat finger” trade that drew in high frequency traders and triggered an almost instantaneous $4 plunge in the price of oil. But notice how it has failed to bounce back. This generated chart sell alerts more than you can count.

The break of the 50-day moving average on the charts is thought to be particularly significant, reversing an uptrend that has been in place since June. Notice that the “fat fingers” always seem to hit the “Sell” button and are oblivious to the location of the “Buy” button … maybe they don’t have one.

On top of all this is the never ending threat of a Strategic Petroleum Reserve release by the administration that would cause prices to immediately gap down. It is safe to say that energy is not Obama’s favorite industry. He is essentially sailing “Buy those $100 calls on oil at your peril, because I will render them worthless.” That is what he did with his jawboning campaign in the spring when crude threatened $107. Substantially tougher margin trading requirements for many commodities by the main exchanges quickly followed.

RELATED: Exxon & Rosneft Plan to Drill for Oil in Old Soviet Nuclear Dumping Ground

One factor that no one appears to be watching is the dramatic ramp up in Iraqi oil production. In recent years, we have gone from zero to 3 million barrels a day, and appear to be headed toward 5 million barrels a day by 2015. That is half of Saudi Arabia’s total annual output. Norway and Canada are also increasing production.

Back in the US, conservation is making a dent on the consumption side in a thousand different ways that are impossible to quantify in the aggregate. Every time someone trades in a gas guzzler for a hybrid or electric vehicle they are cutting US consumption by 24 barrels of oil a year. Toyota will sell 2 million hybrids in the US this year, about half in California. That works out to a total oil savings of 48 million barrels a year, 132,000 barrels a day, or 1.3% of our total imports.

Energy savings are going on every day in a myriad of ways, from better building design, to industrial recycling of heat, and conversion of light bulbs from incandescent to fluorescent. It has become a major cost-cutting issue for US corporations. I just checked the specs on my new 80 inch 3D flat screen TV and it uses a quarter of the power of its cathode ray tube predecessor now headed towards the recycling center (notice how all the actors have suddenly aged 10 years). I have always said that this will be the big sleeper on the American energy front.

RELATED: Big Oil Funding U.S. Politics

The final argument is that in the wake of QE3, there is a sudden death of “Risk Off” positions to trade against. Oil is almost one of the only ones out there. So an oil short will partially hedge out downside risk in the substantial “Risk On” positions we have built up in (GLD), (AAPL), and (GOOG).

The extra turbocharger on this trade is that the hedge fund community is still hugely long oil, betting an attack on Iran by Israel that never came. As we move into yearend, the pressure on them to dump their losers will be overwhelming. So I am quite happy to buy the United States Oil Fund (USO) December $32.50-$35 put spread at $1.07 or best.

The (USO) in particular is a great instrument to play from the short side because it has one of the worst tracking errors to the underlying in the entire (ETF) universe. (Only the natural gas ETF (UNG) is worse). Notice how it always goes down faster that it goes up. This is because of the enormous contango in the oil futures market, whereby far month futures trade at gigantic premiums to the front months. The (USO) has to take the hit on the rollovers; hence, its terrible track record.

....view charts and page 2 HERE



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Personal Finance

On The Subject of Time - Rich Man Poor Man & The Perfect Business


Posted by The 88 Yr Old Investment Legend - Richard Russell via Dow Theory Letters

on Thursday, 27 September 2012 07:17

-- Here's something they won't tell you at your local brokerage office or in the "How to Beat the Market" books.  All investing and speculation is basically an exercise in attempting to beat time. 

"Russell, what are you talking about?" 

Just what I said -- when you try to pick the winning stock or when you try to sell out near the top of a bull market or when you try in-and-out trading, you may not realize it but what you're doing is trying to beat time. 

Time is the single most valuable asset you can ever have in your investment arsenal. The problem is that none of us has enough of it.  

But let's indulge in a bit of fantasy. Let's say you have 200 years to live, 200 years in which to invest. Here's what you could do. You could buy $20,000 worth of municipal bonds yielding say 5.5%. 

At 5.5% money doubles in 13 years. So here's your plan -- each time your money doubles you add another $10.000. So at the end of 13 years you have $40,000 plus the $10,000 you've added, meaning that at the end of 13 years you'd have $50,000.

At the end of the next 13 years you have $100,000, you add $10,000 and then you'd have $110,000. You reinvest it all in 5.5% munis and at the end of the next 13 years you'd have $220,000 and you add $10,000 making it $230,000. 

At the end of the next 13 years you'd have $460,000 and you add $10,000 making it $470,000. 

In 200 years there are 15.3 doubles. You do the math. By the end of the 200th year you wouldn't know what to do with all your money. It would be coming out of your ears. And all with minimum risk. 

So with enough time, you would be rich --  guaranteed.  You wouldn't have to waste any time picking the right stock or the right group or the right mutual fund. You would just compound your way to riches, using your greatest asset -- time.

There's only one problem, In the real world you're not going to live 200 years. But if you start young enough or if you start your kids early, you or they might have anywhere from 30 to 60 years of time ahead of you.

Because most people have run out of time, they spend endless hours and nervous energy trying to beat time, which, by the way, is really what investing is all about. Pick a stock that advances from 3 to 100 and if you've put enough money in that stock you'll have beaten time. Or join a company that gives you a million options and your option moves up from 3 to 25 and again you’ve beaten time. 

How about this real example of beating time  -- John Walter joined AT&T, but after nine short months he was out of a job. The complaint was that Walter "lacked intellectual leadership."  Walter got $26 million for that little stint in a severance package. That's what you call really beating time. Of course, a few of us might have another word for it  -- and for AT&T.

Ed Note: Below are two of the most widely read articles published by Dow Theory Letters over the past 40 years. Request for these pieces have been received from dozens of organizations. Click on the titles to read the articles.

"Rich Man, Poor Man (The Power of Compounding)"

"The Perfect Business"

INTERESTED IN SUBSCRIBING? GO HERE

Letters are published and mailed every three weeks. We offer a TRIAL (two consecutive up-to-date issues) for $1.00 (same price that was originally charged in 1958). Trials, please one time only. Mail your $1.00 check to: Dow Theory Letters, PO Box 1759, La Jolla, CA 92038 (annual cost of a subscription is $300, tax deductible if ordered through your business).

Russell began publishing Dow Theory Letters in 1958, and he has been writing the Letters ever since (never once having skipped a Letter). Dow Theory Letters is the oldest service continuously written by one person in the business.

Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron's during the late-'50s through the '90s. Through Barron's and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-'66 bull market. And almost to the day he called the bottom of the great 1972-'74 bear market, and the beginning of the great bull market which started in December 1974.

The Letters, published every three weeks, cover the US stock market, foreign markets, bonds, precious metals, commodities, economics --plus Russell's widely-followed comments and observations and stock market philosophy.

In 1989 Russell took over Julian Snyder's well-known advisory service, "International Moneyline", a service which Mr. Synder ran from Switzerland. Then, in 1998 Russell took over the Zweig Forecast from famed market analyst, Martin Zweig. Russell has written articles and been quoted in such publications as Bloomberg magazine, Barron's, Time, Newsweek, Money Magazine, the Wall Street Journal, the New York Times, Reuters, and others. Subscribers to Dow Theory Letters number over 12,000, hailing from all 50 states and dozens of overseas counties.

A native New Yorker (born in 1924) Russell has lived through depressions and booms, through good times and bad, through war and peace. He was educated at Rutgers and received his BA at NYU. Russell flew as a combat bombardier on B-25 Mitchell Bombers with the 12th Air Force during World War II.

One of the favorite features of the Letter is Russell's daily Primary Trend Index (PTI), which is a proprietary index which has been included in the Letters since 1971. The PTI has been an amazingly accurate and useful guide to the trend of the market, and it often actually differs with Russell's opinions. But Russell always defers to his PTI. Says Russell, "The PTI is a lot smarter than I am. It's a great ego-deflator, as far as I'm concerned, and I've learned never to fight it."

IMPORTANT: As an added plus for subscribers, the latest Primary Trend Index (PTI) figure for the day will be posted on our web site -- posting will take place a few hours after the close of the market. Also included will be Russell's comments and observations on the day's action along with critical market data. Each subscriber will be issued a private user name and password for entrance to the members area of the website.

Investors Intelligence is the organization that monitors almost ALL market letters and then releases their widely-followed "percentage of bullish or bearish advisory services." This is what Investors Intelligence says about Richard Russell's Dow Theory Letters: "Richard Russell is by far the most interesting writer of all the services we get." Feb. 19, 1999.

Below are two of the most widely read articles published by Dow Theory Letters over the past 40 years. Request for these pieces have been received from dozens of organizations. Click on the titles to read the articles.

"Rich Man, Poor Man (The Power of Compounding)"

"The Perfect Business"

 

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Gold & Precious Metals

Intermarket Explanation for Coming Gold Bubble


Posted by Jordan Roy-Byrne, CMT

on Thursday, 27 September 2012 00:00

As we travel to Toronto for the Cambridge House conference, we thought we’d share a few points from our upcoming presentation titled “The Setup for a Gold Bubble.” There are many different ways we can analyze this. By that we mean fundamental triggers, historical ratios, valuations and potential money flows, etcetera can explain the setup for and why this bull market will become a bubble. Today, we focus on intermarket analysis, which is one of our favorite subsets of technical analysis.

For a bull market to become a bubble, it needs to attract excess money flows from other asset classes. In other words, during a bubble, money flows from various asset classes into a single one. Prior to the bubble the market must be an under-owned asset class with room to absorb the massive flows. This chart, from Pierre Lassonde’s recent presentation shows Gold’s share of global asset allocations. It currently is below 3%, which is extremely low in comparison to the 1980 figure of 14% and considering that the bull market is in its 13th year.

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Moreover, and this a point others have made, Gold’s increasing share as part of the global financial pie is more a result of an increase in Gold’s value than an increase in actual ownership. Back in 1999-2001, Gold’s share was less than 0.5%. Now it is six or seven times higher. Yet, Gold’s value is roughly six times higher!

While some of the newly created money and debt will find its way into Gold, the biggest inflows into Gold will come from other markets and particularly bonds. The bond market, which dwarfs the equity and commodities markets, is by far the biggest market in the world. In recent years and in response to the global economic malaise the average investor and average institution has shifted funds out of equities and into bonds. Inflows into bond funds have been gargantuan while inflows into equity funds have been negative. Thus, in an intermarket sense, the trigger for the coming bubble in Gold will be the shift of funds out of bonds and into Gold and the like.

One way to monitor this is to graph Gold against bonds. Below we show Gold against bonds (bottom) and Silver against bonds (top). Both charts are at an interesting juncture. The next breakout in both charts would surpass the 1980 peak and result in all time highs. Gold and Silver have outperformed bonds for a number of years but the outperformance would accelerate upon breakout in these charts.

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n the meantime, Gold and Silver and the shares have begun to correct and digest the strong gains from the recent rebound. October is the only bearish part of the seasonally bullish period. Interim bottoms typically occur in the middle of or near the end of October. Thus, the coming days and weeks could be an opportunity to shed some bonds in favor of bullion and to pickup some stocks, which you may have missed at the last bottom. If you’d be interested in professional guidance in uncovering the producers and explorers poised to outperform then we invite you to learn more about our service.

Good Luck!

Jordan Roy-Byrne, CMT
Jordan@TheDailyGold.com

About Jordan Roy-Byrne, CMT (Trendsman). Jordan is a Chartered Market Technician, a member of the Market Technicians Association and from 2010-2011 an official contributor to the CME Group, the largest futures exchange in the world. He is the publisher and editor of TheDailyGold Premiuma publication which emphaszies market timing and stock selection for the sophisiticated investor.

Since January 2010, The Daily Gold Premium Model Portfolio is up 82% compared to GDX (-6%) and GDXJ (-14%).  Jordan’s work has been featured in CNBC, Barrons, Financial Times Alphaville, BusinessInsider, 321gold, Gold-Eagle, FinancialSense, GoldSeek, Kitco and Yahoo Finance. He is quoted regularly in Barrons. Jordan was a speaker at PDAC 2012, the largest mining conference in the world. Jordan earned a degree in General Studies with a concentration in International Economic Development. Jordan also lived and worked in Southeast Asia for 3 years in order to study economic development from an emerging market perspective. In his spare time he enjoys spending time with Mrs. Trendsman.

Contact: Jordan @ TheDailyGold.com

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Energy & Commodities

British Columbia's Golden Triangle


Posted by Lawrence Roulston's Resource Opportunities

on Wednesday, 26 September 2012 11:54

A corner of Canada's western-most province hosts one of the richest mineral belts in the world.
Few investors yet appreciate the enormous value of that region.

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