A Good and Golden Sunday Morning to ya

I’m still in Phoenix.  I’m going to appear on Al Korelin’s radio show, which he is taping today (I’m not sure when it broadcasts).  Then I have to go talk to a silver company I find very interesting. Then it’s back to my hotel room to write, write, write.

Marketwatch asks:  “Yellow metal’s rise again outpaces mining shares. Is a bubble in the works?” As I explained to the folks in Phoenix, I don’t think we’re in a gold mania yet.  A pullback wouldn’t surprise me here — I’m good either way.

Why do I think we’re in a for a pullback?  Well, for one thing, there are stories about gold all over the mainstream media.  Even the USA Today is writing about “Investors Grab for Dangled Karats”.  And they quote the usual suspects — James Dines, Doug Casey.  Yeah, a pullback here wouldn’t surprise me at all.

Meanwhile, Larry Edelson wrote to tell me: “This week the Dow/Gold ratio broke important support at the 8.6 level. That strongly implies further big gains in gold and further losses in stocks.”

So, maybe we don’t have to see a pullback before gold goes higher.

But what about energy?  Well, in the oil patch, Pemex’s Cantarell Drops at Fastest Rate in 14 Years.  But demand destruction continues apace.  I don’t expect energy to recover for a couple years. I’d be glad to wrong.  And I’m watching energy as a “tell” for a potential upturn in the economy.

Sunday Morning Reading

I’ve been doing my reading.  Here are some stories I think you’ll find interesting …

John Maudlin has written an excellent piece called “While Rome Burns.” Here’s an excerpt …

The problem is that in Europe there are many banks that are simply too big to save. The size of the banks in terms of the GDP of the country in which they are domiciled is all out of proportion. For my American readers, it would be as if the bank bailout package were in excess of $14 trillion (give or take a few trillion). In essence, there are small countries which have very large banks (relatively speaking) that have gone outside their own borders to make loans and have done so at levels of leverage which are far in excess of the most leveraged US banks. The ability of the “host” countries to nationalize their banks is simply not there. They are going to have to have help from larger countries. But as we will see below, that help is problematical.

If Schadenfreude is your thing, Henry Blodget has put together a list of the financial crisis’ biggest losers.  You can read it here.

Michael Hudson is angry about the Oligarch’s Escape Plan. One small excerpt …

Take the much-vaunted $50 billion program designed to renegotiate mortgages downward for “troubled homeowners.” Upon closer examination it turns out that the real beneficiaries are the giant leading banks such as Citibank and Bank of America that have made the bad loans. The Treasury will take on the bad debt that banks are stuck with, and will permit mortgagees to renegotiate their monthly payment down to 38 percent of their income. But rather than the banks taking the loss as they should do for over-lending, the Treasury itself will make up the difference – and pay it to the banks so that they will be able to get what they hoped to get. The hapless mortgage-burdened family stuck in their negative-equity home turns out to be merely a passive vehicle for the Treasury to pass debt relief on to the commercial bank.

Billmon rips Wall Street a new one in “Chocolate Covered Cotton” (warning –  he swears a lot).  Excerpt:

The carriers (fleas and rats) of this particular epidemic were the bright young Wall Street things who invented the concept of securitized lending – essentially, the repackaging of mortgages, corporate loans, credit card receivables and any other obligations that could quasi-credibly be described as “assets” into allegedly liquid securities that could then be sold to suckers, um, investors the world over.

Related Posts

• Sunday Morning (02/21/10)
• Could Gold Pullback Give You a Golden Opportunity? (10/16/09)
• Sunday Reading (06/07/09)
• Sunday ‘Blow Your Mind’ Edition (01/30/10)
• Monday Morning Reading (02/23/09)