I've got it bookmarked for tomorrow but since must arise at 4:00am for a plant run I'm off to the house for some shuteye....way too early but otherwise I'll never make the bell! LOL ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
No prob..... It will be available for the next six days.
"Or you can turn to Canada's Report on Business Television on the Internet ANY TIME tonight or for the next six days and watch and listen to Sprott Asset Management's chief investment strategist, John Embry, as he is interviewed by Jim O'Connell and telephone callers on this afternoon's ROB-TV "Market Call" program.
Among Embry's observations:
-- He agrees with Newmont Mining President Pierre Lassonde that the gold price will reach $525 by the end of this year.
-- The new chairman of the Federal Reserve, Ben Bernanke, is a dedicated inflationist and will be very good for gold.
-- Economic problems in the United States are intractable and the truth about them is not being told officially.
-- Massive worldwide monetary debasement is ahead and that will be good for gold.
-- The gold market "doesn't act right because there are intrusions into the market by guys who want the price to remain suppressed."
-- The growing number of market anomalies suggests that markets in general are increasingly being manipulated by the U.S. government as a matter of national security.
You can find today's "Market Call" program at the ROB-TV archive here:
Scroll down to the 12:30 p.m. Tuesday section. It's an hour-long show and you're not likely to find anything better on TV until they bring "Dobie Gillis" back."
With very little economic news in the markets today, stocks drew a bid on lower energy prices and a further bounce from what was considered an oversold condition two weeks ago. The bulls are convinced we will see a November-December stock rally to close the year, but many fear the Federal Reserve’s hawkish stance with higher interest rates will dampen the buying climate for stocks. Treasury bond and note prices are slightly lower today pushing the yield on the ten-year note marginally higher to 4.61%. The mantra on Wall Street appears to be that the economy is strong and inflation is well contained as the Fed continues to march-on toward higher rates. Folks keep wondering why the Fed is so absolute about raising interest rate; in my mind the answer is simple…we have mountains of new debt to sell in the very near future, and the Fed has to do everything possible to make U.S. debt attractive. I firmly believe the markets are being conditioned to sell Treasury debt next week.
Stocks could bounce higher through the end of this week, but I don’t expect the broad stock indices to do much next week while the Treasury auctions $44 billion for the quarterly refunding. Today the Treasury announced they will sell $18 billion of three-year notes on Tuesday followed by $13 billion of five-year and ten-year notes on Wednesday and Thursday respectively. Overall in the fourth quarter the Treasury plans to sell $96 billion worth of new debt, so the $44 billion next week is not even half of the nut needed for the quarter.
On the U.S. Treasury’s website I found some interesting numbers. Last quarter the Treasury borrowed $52 billion, plans on borrowing $96 billion this quarter, and is looking to borrow a whopping $171 billion in the first quarter next year. Note that this year in the first quarter the Federal Government borrowed $144 billion. The needs for next year are nearly 20% higher! In today’s announcement the Treasury also said they will auction 30-year bonds for the first time in four years on February 9, 2006. Since October 2001 the government has not sold any 30-year debt, but instead resorted to selling shorter maturities, especially the two, three and five-year notes. Three-year notes were brought back to fill-in more supply on the short end of the curve. With the huge issuance of two and three-year debt over the last three years, the Treasury’s refinancing needs will grow larger sooner rather than later. Just look at the proposed issuance for the first quarter, and then ask yourself what they will need additionally for the reconstruction on the Gulf Coast and to pay for all the losses in Iraq.
Back on May 4th I wrote “Treasury Auctions in the Spotlight.” In that article I detailed the price action of gold and noted on the chart how gold prices consistently came down just prior to the Treasury’s quarterly refunding. This time around has been no different with gold touching $483 on October 12th, and now roughly $20 lower just days before the auctions begin. Also note how convenient the timing is to have energy prices falling in sync with gold coming down….the Fed’s message: “Everything is under control!!!” Similarly, bond prices should stay down until the Treasury auctions are complete, then I’m expecting an oversold bounce so the primary dealers will have a week or two to sell the debt inventory purchased at the auctions. Likewise, stocks get a bounce this week with the warm-fuzzy the economy is doing just great, which also puts downward pressure on bond prices. You can expect very little volatility next week as most markets are “muted” so as to not attract any attention away from selling the government’s debt. If the debt is not bought, the Fed will have to print-up the money for the Treasury to spend. That day may come at some point down the road!
Fed Target: Remove “Froth” From Housing Market
One of the Federal Reserve’s goals in raising interest rates is to take some of the “froth” out of the housing market. They are clearly winning the battle to slow down real estate. Today the Mortgage Bankers Association announced its applications index fell 4.8% with the purchase index down by 6.2% and the re-fi index lower by 2.8%. The 30-year fixed mortgage rose from 6.06% to 6.21% and the average one-year ARM moved two basis points higher to 5.39%. With the Fed move to 4%, banks have raised the prime rate to 7%. Housing should continue to slow.
With the slowing of the real estate market, we can expect the overall economy to continue slowing without the stimulus from cash-out refinancing. In a Fed study it was estimated that homeowners extracted $600 billion in cash from their home equity in 2004. Yesterday Freddie Mac said homeowners are expected to extract $204 billion this year and forecast the number will drop to $114 billion in 2006. The economy will clearly lose a great deal of stimulus with the consumer tapped-out with debt. Yesterday ABC News and the Washington Post said U.S. consumer attitudes have worsened in the past two weeks. The consumer comfort index fell to negative 21 in the latest week from negative 19. Attitudes about the economy were steady, but sentiment about personal finances and the buying climate worsened. Wal-Mart is already talking about offering BIG discounts the day after Thanksgiving to kick-off the Holiday Shopping Season. Me thinks retailers had better watch their inventories closely, or they could be selling super-discounted Christmas items well into the first quarter!
Energy in Transitional Phase Before Heating Season
Energy prices were volatile today with the Energy Department’s release of the current inventory data. Expectations called for crude to build 2.0 million barrels, and the build came in at 2.7mb. Unleaded gas was forecast to gain 900,000 barrels with the actual build coming in bigger at 1.5mb. Distillates were expected to show a draw of 800,000 barrels, but actually only fell by 200,000 barrels. At the announcement prices moved lower, but within minutes turned positive with crude over $60 and unleaded and heating oil in positive territory. After the spike to the plus side, the energies were taken down across the board. By the end of the session, crude closed only ten cents lower, unleaded was down 2.7 cents to $1.577 a gallon and heating oil came off two cents to close at $1.785.
Energies are getting a nice break with temperatures near 70 degrees in the Northeast and less demand for gasoline with the driving season behind us. It has been unseasonably warm this week, but in the longer-term weather forecasters are predicting a harsher than normal winter…consistent with a harsher than normal hurricane season. Yesterday the U.S. Minerals Management Service said shut-in oil production in the Gulf was just over a million barrels of oil per day, the equivalent to 67% of the Gulf’s daily oil production. Shut-in natural gas production was 5.3 billion cubic feet per day, the equivalent to 53% of the Gulf’s daily production. Since last Wednesday, the price of natural gas has been crushed from $14.60 to $11.60, more than a 20% decline in a week! Based on the shut-in production and the forecast for a harsh winter, I expect prices to move notably higher when the next cold front drops down from Canada. If you have either lots of guts or lots of capital, there may be an opportunity to go long in natural gas futures!
Back to the Debt Auctions
Overall I don’t expect to see much from gold and silver over the next week or so until the Treasury auctions are out of the way. I have yet to see any noteworthy price movements during the three days of “quarterly refunding.” Keep a close eye on gold to see a re-test of $460. In the past, the Friday and Monday just prior to the auctions have seen the short sellers come into the gold pit with guns blazing! I’m not saying it’s going to happen, just noting patterns from prior auctions…they have a tendency to repeat! It is absolutely imperative for the Treasury to sell all its debt…just watch next week while the markets appear to be in a coma until the debt is sold.
Tomorrow we will get non-farm productivity, initial jobless claims, the ISM non-manufacturing index and factory orders. Watch to see if bond prices move slightly lower on good economic news to make the yields even more attractive for next week’s debt sales. I’m still waiting for the dollar to roll-over when the current account deficits come back into full focus. All we’re hearing about right now is higher interest rates and higher bond yields. When the debt re-financings continue to grow larger and larger with each passing quarter global investors will have to ask themselves who, and for how much longer will investors and governments continue to loan money to the U.S.A. while our government shows absolutely zero regard for fiscal discipline. The Fed is continuing to raise interest rates because that is what they MUST DO to keep the fiat ponzi scheme we call money (Federal Reserve Notes) alive and functioning. The Treasury will have HUGE borrowing needs moving into 2006 and beyond. The Fed is working NOW to create an atmosphere wherein global investors will be attracted to buying debt denominated in U.S. dollars. Global imbalances continue to grow larger and larger…lots to think about!
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