Never
underestimate the power of stupid people in large
groups. As the editor of the Silver Bear Cafe, I spend most of my time researching current events. I explore the markets, the war, precious metals, the Federal Reserve and energy. In this weekly column I will attempt to condense the week's events and examine how the news might affect your pocketbook. JSB Financial Markets Last week, Japan's prime minister Junichiro Koizumi, said that diversity in foreign exchange reserves is necessary. You may recall that just last month the South Korean central bank spurred a similar dive in the dollar by issuing a report that also talked about foreign exchange diversification. Since both of these countries hold lots of dollars, when they talk about diversifying the logical conclusion is that they would pare back dollars. Maybe they would instead beef up their euro holdings. The important point to note in regard to the Japanese comments last night is that Japan's US security holdings are more than triple that of South Korea's at over $700 billion. This also hit the U.S. bond market where the government is auctioning off 10-year notes. A big worry for that market has long been that big bond holders like Japan and China would decide at the very least to stop buying as many as they have been in recent years. The mere worry is something that could add to upward pressure on interest rates. The U.S. Dollar index closed out the week at 81.39. I expect further downward pressure in the coming weeks that will send the dollar below the all important 80.00 mark. If the dollar does break below 80.00, brace yourself for a "freefall". As the dollar declines, interest rate will rise putting extreme pressure on both the bond and housing bubbles. On the war front In spite of what you hear from the mainstream, I believe the Bush administration is planning an invasion of Iran. After all, why would Iran be so adamant about developing a nuclear program for the purpose of generating electricity when they are sitting on some of the largest oil and natural gas reserves in the world. Israel, already a major nuclear power, will never allow the Iranian Mullahs to develop the capability to land an armed warhead on Jerusalem. Since, to a large extent, our country and the world are controlled by Jewish interests, the U.S. military will forever be embroiled in the Muslim / Jewish conflict. Meanwhile, in the Far East, the sound of rattling swords can be heard as China gears up to invade Taiwan. China unveiled a law last Tuesday authorizing an attack if Taiwan moves toward formal independence. Taiwan, which declared its independence in 1949, has announced war games aimed at repelling an attack. Large-scale military exercises will be held from mid-April to August, with troops practicing knocking down Chinese missiles and fighting communist commandos, said Taiwan's Defense Ministry spokesman Liu Chih-chien. Just how the U.S. will respond to a clash between these two Asian nations cannot be foretold as the U.S. Military is already stretched through out the Middle East and South America. Taiwan's Mainland Affairs Council, which handles the island's China policy, said the law gives China's military "a blank check to invade Taiwan" and "exposed the Chinese communists' attempt to use force to annex Taiwan and to be a regional power." The island's vice president, Annette Lu, accused Beijing of violating international norms for peacefully resolving disputes, as Taipei prepared for an invasion. No matter how the Bush administration plans on reacting to the developments in the Far East, expect a draft of some sort to be reborn sometime in the near future. Precious Metals What do you do when commodity prices have blown past expectations and the bull market for stuff like coal, nickel and copper shows no signs of slowing down? You could call commodities the new investment "mania." Or you could simply accept the fact that the bull market continues to chug along and raise your price expectations for base metals. Analysts at UBS did the latter yesterday when they upped their 2005 forecasts for everything from aluminum to zinc. As a result, the future earnings of a number of high-flying Canadian mining companies suddenly looked more robust.
said UBS analysts Matt Fernley and Peter Hickson in a research note yesterday. Aur Resources Inc. (AUR.TO) is a Canadian-based, international mining company active in the acquisition, exploration, development and mining of mineral properties. Aur has three producing mining operations and derives approximately 95% of its revenue from the production and sale of copper. The Company’s strategic objectives are to expand its activities in the mining business with emphasis on base metals and to increase profitability and thereby enhance shareholder value on a long-term basis. Aur has a highly skilled and experienced team of employees, efficient mining operations, a solid financial position and a commitment to safety and environmental preservation. Three weeks ago I introduced our Private Dining Room members to Northgate Minerals Corp (NGX.TO). Since then the stock has appreciated by 11%. Gold should now look to target between $445/oz and $448/oz, followed by a test of last year's high of $457/oz, although profit taking and fresh rumors of International Monetary Fund sales are likely to be seen along the way. Energy The world's increasing appetite for crude oil currently provides a sector that has almost as much potential as silver. The price is headed right back to $55 per barrel and beyond. Exploration companies offer the greatest leverage, and there are many very well managed and well funded companies whose stocks are undervalued. I am not, and never will be, a day trader, but in the long run, any issue involved in the energy sector warrants consideration. Canadian companies can provide double duty as their shares are valued in Canadian dollars and, as such, can provide an additional hedge against the tanking dollar. North American natural gas production already had fallen 6 BCf/day below the National Petroleum Council's forecast for 2005. The Council’s new Report estimates that, by 2015, North American production from “traditional U.S. and Canadian sources of supply” (defined by the Council to include every basin south of the Arctic Circle) will fall an almost unfathomable 21 BCf/day short of the levels the Council had concluded would be necessary to meet the needs of the U.S. market when it issued its earlier Study less than five years ago. Even if the proposed Alaskan natural gas pipeline ultimately goes forward, it will not be completed for at least a decade; further, as much as the additional supplies it brings are needed, if and when it goes into service, it still will offset less than 21.5% of the shortfall in production identified in the Council’s Report. This situation obviously demands that the increased importation of non-domestic natural gas is on the horizon, and the largest remaining deposits of natural gas are located in the middle east. The necessity to convert natural gas into liquefied natural gas, (LNG), in order to transport it provides an exceptional long term investment opportunity. The following four companies are provided for your consideration. As always, investment decisions are best made after a thorough exploration of the company's management and financial condition. Teekay
Shipping (nyse: TK) Each of the companies is positioned for long term gains, IMO. The Fed The
Fed has painted itself into a corner. "Bubbles" Greenspan
knows that he cannot continue to keep
the bubbles inflated, if bond prices continue to
tank as the buyers wise up to his shenanigans.
The bond market is huge compared to the stock market.
In fact, it is way to big to be controlled by any
one entity. It is controlled by speculators, which
include countries like Japan, China, India, and
Russia, among many others. Get out of equities. Of
course, after the stock market falls. the bond market
will
follow, and when the bond market implodes the
real estate bubble is going to blow the economy
to bits. This is not a matter of if, it
is just a matter of when. Financial Survival Buy anything, buy gold, buy silver, buy land, buy silver, buy commodity stocks, buy silver, buy diamonds, buy silver, buy a '56 Chevy. Buy any damn thing but get out of dollars! If you can't think of anything else, you might consider buying some silver... Live within your income, or below it, if possible. The only way that this economy will recover is by increasing our rate of savings. Today’s rate of household savings has dropped to .4% from 7.7% in 1992. We need to resurrect the virtue of thrift. EverBank’s FDIC-insured World Currency Deposit Accounts and CDs – denominated in any of the world major currencies, including the euro, Swiss franc and New Zealand dollar – offer you an incredibly simple and efficient way to invest in to many attractively priced currencies. Simply
exchange your dollars for the currency or
currency basket of your choice, and receive
interest rates several times as high as those
offered on dollar deposits. Eliminate as much debt as possible, especially “variable rate” debt, such as credit cards and lines of credit. Interest rates will be rising, so the elimination of debt offers a “real return” of escaping rising rates by creditors. Get some control over some fresh water. If you are depending on Social Security, stop. Follow the course opposite to custom and you will almost always do well...
More next week... If you have not yet joined "the Bear" and/or have questions, please call us, toll-free, at: 1 (877) 389-7626 May the Great Spirit be with you always,
Johnny
Silver Bear Disclaimer All statements and expressions are the sole opinions of the editor and are subject to change without notice. A profile, description, or other mention of a company in the newsletter is neither an offer nor solicitation to buy or sell any securities mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof, nor the statements made herein. The staff of Silver Bear Cafe are not registered investment advisors and do not purport to offer personalized investment related advice. The publisher, editor, staff, or anyone associated with, or associated to the Silver Bear Cafe may own securities mentioned in this newsletter and may buy or sell securities without notice. |
Its
not what you don't know that will screw you up, it's
what you know that is wrong. The spin you hear from the
mainstream media is intended to mislead you. Open your
eyes and face the future. If you leave your head in the
sand and ignore it, you are only leaving your butt exposed
for the world to kick. This all may sound like gloom
and doom, but when you get a handle on what is going
to happen, you will have a future filled with opportunity.
Fortune favors the Informed.