Trader Dan's Market Views: 12/07/12

"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

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Friday, December 7, 2012

Silver still Mirroring the CCI

Silver continues to mirror the CCI with traders unsure of what direction to take things next.

Mining Shares Eroding further Against Gold

When I normally lay out a chart detailing the ratio of the mining shares to the price of an ounce of gold, I use the HUI. I will still put up one of those further below but wanted to show you a ratio chart using the XAU to illustrate just how cheap these mining shares have become relative to gold itself.

The chart is simply staggering. I have gone back as far as my data will allow me with this and cannot find a reading so low.

I cannot overemphasize how critical it is that the CEO's of these mining companies listen to the message of the market and make the necessary changes to their organizations.

The two biggest things I can read in this message is to:

1.) Get a handle on expenses and cut them
2.) this follows on #1 - return those savings to the shareholders in the form of higher dividends.

Do this, and investors will react positively. Why? Where else can you buy so much gold at such a discounted price to the current market value? Relative to gold, some of these shares are as cheap as they have ever been, period.

Checking in with the HUI, some of the shares that comprise that index are as cheap, relative to gold itself, as they have been in ELEVEN years.

YenGold near all time Highs

TAke a look at the following chart of gold, priced in terms of the Japanese Yen, and then tell me that the Japanese monetary authorities and political leaders are not deliberately debauching their currency. "PRINT, PRINT, PRINT; BANSAI, BANSAI, BANSAI"! They are killing their own currency in terms of its purchasing power.