Correlation Economics Backup

Today we had a pretty big decline in the price of silver and gold: almost a 7% decline. And by coincidence the timeline is precisely 5 months between each margin requirement hike. The first big drop in the price of precious metals came on 02 May 2011 . The second big drop in the price of precious metals came on 23 September 2011  on top of another margin requirement hike and operation twist. This time, something fishy is happening, but I can't tell what. Maybe another margin requirement hike? Maybe because of Bernanke's testimony? =>  Bernanke Speech =>  Ron Paul at the Bernanke Testimony The timing of course, is a pure coincidence. I'm wondering if they are trying to manipulate it down for a third time. We'll see... Timeline of Margin Requirement Hikes in Silver/Gold (PSLV)

I recently discovered (autodidacticly) that MZM velocity correlates well with 10 Year US Bond Yields. To see the analysis go to:  Treasuries are a bad deal

Marc Faber told us to buy Japanese equities last year , saying that government bonds in Japan would underperform equities. One of his stock picks was Nomura Holdings ( NMR ), which has a dividend of 2% and price to book ratio of 0.65. Its last quarter net earnings were $US 200 million , but has had big losses in the previous quarters. Nomura is a speculative play on Japanese equities, but I believe Japan is undervalued by investors. I fully concur with Marc Faber to buy Japanese equities, and the best play for this is Nomura Holdings. If people start loving Japanese equities, Nomura will flourish as it is the primary brokerage service in Japan. To see why equities will outperform bonds, go here: Nomura Holdings: Japanese Equities to outperform Bonds .

Today I was thinking about the yen dropping against other currencies . Mostly, such things happen when governments print money. But also when countries post deficits in their current account balance. The mechanics are as follows: A country exports stuff to other countries and receives money in foreign currency. Let's say Japan exports Playstations to America and receives US dollars. Japan will of course want yen, and will exchange those US dollars into yen so that they can buy things with yen in their own country Japan. If Japan exports more to the US as the US exports to Japan, then more money will flow to Japan than to the US. So more US dollars flow to Japan as yen flow to the US. Which means more US dollars need to be converted into yen, which makes the yen rise. Conversely, when Japan has a trade deficit, like today, then the yen will drop against other currencies out there. So basically you want your currency to strengthen, which indicates that your balance sheet is improving...

Look how people of Greece are now working without salary: http://www.zerohedge.com/news/its-official-greece-unveils-negative-salary

Agricultural prices have been bottoming out since 2012 after a large decline in 2011 as I already pointed out here . Similarly, many potash producers have seen a huge decline in their stock prices. Once the trend changes, it will be time to buy back into the potash sector. One of the best speculative investments out there is Allana Potash ( ALLRF.pk ). To see why this is go to:  Allana Potash: Undervalued Potash Producer of the Future

Vista Gold ( VGZ ) has been in the spotlights because of Eric Sprott's involvement in the company ( 5 million shares or 7% of the company ). Recently Sun Valley Gold invested quite a big amount in Vista Gold ( 6 million shares ). Vista Gold's market cap is $US 250 million. The company has no debt and has a working capital of $US 25 million. Its management is very experienced (all around 30 years of experience). To see my analysis go to:  Why Vista Gold is Extremely Undervalued Vista Gold (VGZ)

On 20 January 2012, the National Association of Home Builders showed  confidence in the housing market rose for a fourth month in January to the highest level since June 2007. There are many reasons why I follow Marc Faber's market outlook and this is one of them. He is mostly right in his predictions. A few months ago, Marc Faber told us that US real estate was a bargain . And look what happened, the housing market index improved. Housing starts also improved more than forecasted . Housing Market Index As a result the iShares Dow Jones US Real Estate ( IYR ) has been doing quite well over the last years. iShares Dow Jones US Real Estate (IYR) There has been evidence of houses in the US with multiple bedrooms, swimming pools, etc... that can be bought for only $US 150000. That is a real bargain if you compare that to where I live (Belgium), where you can only buy a medium sized appartment for $US 200000. I don't recommend buying US real estate as I know interest rates in the U...

Real estate in China, which accounts for 13% of the Chinese economy , has been bottoming out since the beginning of 2012. China has been actively directing the bank reserve requirements and deposit rates since many years. What China is doing is not to be underestimated and I'll show this in this article:  China: How Real Estate, Reserve Requirements, Yuan and US treasuries interact

There has been much talk about Greece defaulting on 20 March 2012 . I can't agree more on that statement. By 20 March, Greece needs to pay $US 18 billion in bond payments. In 2014 their $US 100 billion debt matures Here's why I think they won't be able to pay off their debt:  Greece: The "Debt"-line is near

I found an interesting article about PAGE: Pan Asia Gold Exchange. http://www.marketoracle.co.uk/Article32678.html What caught my eye is that PAGE could literally obliterate the market manipulation as the US won't be able to play with margin requirements. If the US were to increase margin requirements, the price of gold in the US would go down, while the price of gold in China would be higher. Chinese would then sell their gold and buy US gold which makes the price go to equilibrium again. Anoter important fact is that PAGE is 100% backed by gold, while GLD, COMEX etc... don't really have the gold. Finally, PAGE will be the prerequisite for China to introduce the yuan as reserve currency.

Today Goldmoney presented a nice chart about the relative performance of several commodities. Notable is that natural gas has done really bad, due to oversupply. While silver and platinum are the best performers. Performance year to date of commodities

Capacity Utilization reported at 78.5% . I think that this is still bullish going forward for precious metals. The uptrend is still intact, so no worries holding gold and silver. But I expected it to go up more, so I'm a bit disappointed... See my analysis at:  Seekingalpha

At the beginning of 2012 agriculture prices are starting to turn around after the big correction that occured in 2011 (Chart 1). Speculators have started to add net long positions in agriculture due to drought concerns in South America. Chart 1: Rogers Agriculture ETN (RJA) A great play on agriculture is Adecoagro (AGRO), to find out, go to:  Seekingalpha

As I wrote an article about Platinum a few days ago , Goldmoney.com has its eyes on the Platinum price too: You can find the article here: Goldmoney's article

Today I present you notable bullish insider transactions for the last 13 weeks. 1) LaCie 2) Sears 3) Transocean 4) Wendy's 5) Dominion To see the analysis go to:  Seekingalpha

Coeur D`alene Mines Corporation ( NYSE:CDE ) is a very interesting silver play, which was on my list to buy. The Company’s properties are located primarily in the United States, Australia, and South America. They have 200 million ounces of silver ($US 6.6 billion) and 2.5 million ounces of gold ($US 4.3 billion) (proven and probable reserves). This translates to 60% silver and 40% gold. So Coeur D'alene Mines Corporation is essentially a silver play and that interests me because I'm bullish on silver. Notable is that Sprott Asset Management significantly increased its position in Coeur D'alene Mines Corporation in September of 2011. On 06/30/2011, Sprott Asset Management reported holding 65,500 shares with a market value of $1,589,030. This comprised 0.21% of the total portfolio. On 09/30/2011, Sprott Asset Management reported holding 1,359,200 shares with a market value of $29,141,249. This comprised 3.65% of the total portfolio. The net change in shares for this position...

Interesting interview on PSLV (Sprott Physical Silver Trust) with Eric Sprott. Enjoy: http://www.smallcapepicenter.com/ceo/AGORACOM_CEO_INTERVIEW_FEB_10_SRPOTT_SILVER_TRUST/Feb102012.html

Today president Obama disclosed the projected US budget deficit for 2012. The projected deficit would reach $US 1.33 trillion in fiscal year 2012 . While in December 2011 the trade deficit widened to $US 48.8 billion . For full year 2011 the deficit was $US 1.3 trillion . Here's what the government forecasted previously (Chart 1). They forecasted a smaller deficit in 2012 of only $US 1.1 trillion . Clearly they got it entirely wrong because the deficit in 2012 is projected to be larger than 2011, namely $US 1.33 trillion. To see what this means go to:  The road to hyperinflation .

I could not be more bullish on Capstone Mining ( CS ) today. Two years ago I heard Peter Schiff say that people should buy Capstone Mining at $US 3.2 a share  before it was too late to buy it. Today, the price of Capstone mining is exactly $US 3.2 a share at a P/E around 12. So basically nothing happened to the share price and no dividend was paid to the shareholders. You would think that the company did nothing in those 2 years. But that is far from true. Find out on this link . Chart 1: Capstone Mining (TSE:CS)

Looks like the BDI is forming a bottom. It could be that demand for industrial commodities is growing temporarily. It is very important to know that the BDI doesn't correlate very well with commodity prices, but it correlates excellently with demand. If demand picks up in the coming months, we could see gains in stocks while people flee the dollar cash. Baltic Dry Index Baltic Panamax Index Baltic Supramax Index

Since 2011 the gold price has been rising a lot, while platinum was going down. One of the reasons for this drop is weaker industrial demand due to the economic crisis. Other reasons are unwinding of funds and China slowing down. Platinum can be classified as a precious metal due to its rarity (30 times rarer than gold), but it's also an industrial metal (high heat and corrosion resistance). So it doesn't hold up as well as gold, which is money. The reason why platinum should be more expensive as gold is because platinum is very difficult to mine . But there are many other reasons out there, to find out click here .

Gold has been riding a phase 2 bull market since it crossed over $US 1000/ounce since 2010. But silver is still in a phase 1 bull market. Nobody is buying silver, you can't buy silver in a bank. But the interest in silver is slowly arising and coming into a phase 2 bull market. As an anecdote I'll tell you a short story of my silver buying experience. Last year I went on holiday to Hong Kong and the idea to buy silver crossed my mind. So I went to Hang Seng Bank to do the same. They told me they could only buy gold for me, not silver. I was not interested in gold, because I wanted to be invested in the real 10 bagger, which is silver. I asked if they had silver stocks then? Answer, they had none. They didn't have Silvercorp Metals on their Hong Kong stock exchange, which is the best silver producer in China. I was completely flabbergasted. Then next on, I told the clerk to give me gold. Her advice was: "Why buy gold? it is already so high". After hearing this, I i...

I noticed that the spot natural gas price in America is going down while the Russian natural gas price is going up. Both natural gas prices started at $US 290 per thousand cubic metres gas in the beginning of 2007. Today Russian natural gas is 4 times more expensive than American natural gas. I wonder why this is... Read my article to find out:  Dominion: a play on natural gas disparity

Today I came across a very nice (and funny) presentation on how much government debt exposure these European banks have on their balance sheet. You can find the presentation here:  http://demonocracy.info/infographics/eu/debt_piigs/debt_piigs.html Bank government debt exposure (Demonocracy.info) Based on this picture you can almost predict which bank is the safest/riskiest bank to place your money in. The banks with the highest exposure to government debt are the banks that are the most risky when we are faced with a government debt collapse. Almost all of them are Spanish and Italian banks. If you do place your money in a bank, choose wisely! Or do what the wise man would do, don't choose, instead buy gold.

The cold weather has struck in Europe and demand for natural gas has picked up. Let me give a status update. United Kingdom: Preparations have been made across London to deal with what is forecast to be 5-10cm (up to 4in) of snow falling across England's capital city. Transport for London (TfL) said that over 100,000 tonnes of salt was ready to put on the roads, more than before. Austria: In Austria, temperatures in the western city of Salzburg hovered around 7 degrees Fahrenheit (-14 Celsius) on Saturday, and a technical problem at a power plant left 10,000 households without heating on Saturday. Boznia and Herzegovina: Rescue helicopters evacuated dozens of people from snow-blocked villages in Bosnia and air-lifted in emergency food and medicine as a severe cold spell kept Eastern Europe in its icy grip. Two helicopters were used Wednesday to rescue people and supply remote villages in northern Bosnia. All together some 200-300 people are cut off. Some villages have had no elect...

Natural gas prices have been plummeting more than 50% since its peak in 2010 and is attributed to the huge oversupply in natural gas . More and more natural gas has been found while consumption doesn't keep up with supply. But as Marc Faber famously quotes: "The best time to buy commodities is when markets are glutted". This is because the prices are the most depressed during these times. One company that I highly recommend is Gazprom (OGZPY), due to its exposure to natural gas and oil. To see why I recommend to buy Gazprom please go to my article located here:  Gazprom benefiting from Europe's snow: OGZPY It's important to monitor the Russian natural gas price which can be found here: http://www.indexmundi.com/commodities/?commodity=russian-natural-gas&months=60 Notable is that natural gas prices in America are plummeting, while Russian natural gas prices are going up.

Hong Kong is one of the best parts of Cina to invest in real estate. The Centa City Lead Index, which tracks the secondary private residential property price  in Hong Kong is still in an uptrend, despite some weakness in 2011.  Centa City Lead Index I highly recommend Sun Hung Kai Properties to benefit from this uptrend. This company is strong in Hong Kong and also has property in China: Shanghai, Beijing... So let's look at the Shanghai property index. The one year chart looks like it's bottoming out. Shanghai Property Index The long term chart of Sun Hung Kai Properties is bottoming out as well and correlates very well with the Shanghai Property Index chart. Sun Hung Kai Properties SUHJY And last but not least: Marc Faber bought Sun Hung Kai Properties at the end of last year as disclosed in this video .

As the gold correction has almost run its course, it's time to once again benefit from the rise of gold by buying into gold mining stocks. One nice growth story is New Gold ( NGD ). New Gold has 3 operating properties: Mesquite, Peak Mines and Cerro San Pedro Mine with altogether approximately $US 200 million net cash flow. The market cap of New Gold is $US 5.54 billion with a price to book value of 2.5. This corresponds with a P/E of 24.78. Cash costs of the projects are coming down, while production is steadily increasing. You could think this is very pricey, but the secret lies in its development projects of which the cash flow will grow at an exponential pace. New Gold has 3 development projects: New Afton, El Morro and Blackwater. These properties will propel NGD exponentially. To see how, please visit my article at:  Seekingalpha

For those who haven't seen the Slovenia resource conference in 2008 by Marc Faber, here it is. The most important chart in the presentation was the Zero hour graph (part 7), pointing to hyperinflation. Everyone needs to watch this to understand what is going on.