Friday, February 18, 2011

History in the making

Houston, This Is Blythe, I Have A Problem

Tyler Durden's picture

And silver surges on margin hike news, taking out $32, and fresh 31 year highs. Something is very wrong. Our only question: how long before the American taxpayer has to repeat the AIG experience, and bail out JP Morgan over its billions in silver shorts...

Easy Odds

Last night I met up with an old friend who after a pension worthy NFL career went on to get an MBA and worked for the Vampire Squid before heading out on his own. Also, he is about to launch a very interesting athlete commutation social site that we will mention when the time is appropriate.

We clearly have one major difference of opinion, what the future holds for the Au chart. I tend to avoid arguments since the only way I can be fired is if the market tells me I am wrong, I have nothing to gain from discussing in detail what I think about anything with any other human.

So, we settled on a simple steak dinner bet, my suggestion. He offered an over under at $1,400oz Au on 12-31-11. I am a handicapper at heart so that was one that I am all in on.

Here is just a quick example of how “Out of touch” I am with former Squid employees and the society in general. I truly believe that we will see Au/Dow at 1:1. We have seen that 2 times before in the past 100yrs, we will see it again. To me, I want to sell gold when it seems like someone is willing to give me another asset that I want at a discount. At this time, people still take this worthless paper and give me gold. I am totally amazed that this transaction is still available. And for example, if I wanted a commercial warehouse space for the utility and cash flow, it’s probably in a submarket that has 35% vacancy issues and a broker tells me how it should trade at a 6cap and how I don’t understand anything. When I ask about the several hundred million of flat tire conduit financing being held back in this area and what that will do to the already oversupplied market he says that I have just successfully removed myself from his A-List for future deals. So, why would I trade say 1,400 ounces of gold for that while the Middle East burns and the regime here can’t agree on how to cut 2% of the annual budget DEFICiT. Thats right, of the DEFICIT, not even the entire thing. Right, that is with the same currency that I can trade for the Au.

I will keep taking that for now and will take my steak dinner, but he will need more fiat to pay for the steak as beef prices are set to rise, how can they not have you seen a corn chart?

Thursday, February 17, 2011

Nothing to see here......Move Along.....Papers Please Sir

Cotton hits $2.11/lb

I am so tired of these speculators and also these negative pessimistic people who don't give the banking cartel any credit for saving the world from disaster. They had to create all that currency or we would have all been doomed. Paying $15/pair for socks is the least we can do to thank them. Good thing Net Neutrality will keep us safe from posts like this that try to put a negative spin on everything.

Also, CPI is now calculated using WTI so no increase there and excluding cotton. So basically, CPI = Cost of everything except corn, wheat, orange juice, coffee, meat, soy beans, oil except for WTI, all clothing. Pretty much it is just rental equivalent, that is CPI. But consider this, no one can really get a loan now unless they are a physician or a lawyer or work for a giant company and really most of those people are upside down in their homes so they are out. So, the rental pool is growing like crazy (I would like to think that I saw this coming but maybe it was an accident that I bought a bunch of cribs to house these people....side note, I am renting the same place back to them that I paid $0.10 on the dollar for but that is ok) So, when rents go up we will take that out too.

At the end of the dollar's time in history CPI will be just condoms and pine straw. That will be how they calculate it, they will use the last two things on earth that don't demand more fiat, because if hey have to give a COLA increase to anyone on entitlements, which means everyone, they will enter the rate rise feedback loop and game over.

Madness of a Lost Society

This is great. I like watching these "Non-Precious Metal Owners" crush each other to get $10 toasters.

After 99 weeks of unemployment they are well rested for the stampede.

Rare Earth Elements Update

The fact remains that you can do all the analytical work you want but there is a huge macro trend in place. China is at war with the US. They fired the missile off the California coast as a press release that if we like having subs in their harbors they can do the same. They don't appreciate being called a currency manipulator by the biggest currency manipulator of all.

Here is why this is important. The world used roughly 100kt of REEs last year. China is slashing export quotas we know that. In the war this is one of their best weapons as the US, Canada and Australia might get 20kt of material online before the end of 2012 and literally their life as they know it depends on REEs.

If this is your biggest tool in a war then you must crack down on things that weaken it. The news last fall of the fishing boat skirmish off the Chinese coast was not as it was reported. The Japanese mafia has been an active smuggler of REEs out of China for several years. The price of these materials has risen roughly 500-800% on a blended basis. These leaks of material must be stopped.

The attached article is another step in controlling these supplies. It is a smart move by the Chinese.

Here is how you pick the proper REE stocks.
  • What is in the deposit? You need to see "heavy" REEs
  • What is the cost per kg of extraction? Be sure you get the NET cost as other materials can be sold to lower it
  • Pick mines that will produce before 12-31-15 remembering that 100kt-150kt depending on growth of demand needs to be replaced before supply issues emerge
  • Share structure, use your own judgement but make sure you are getting an appropriate slice of the pie
Best of luck, you will need it.