"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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JACOB MARLEY: Why do you doubt your senses?
SCROOGE: Because, a little thing affects them. slight disorder of the stomach makes them cheats. You may be an undigested bit of beef, a blot of mustard, a crumb of cheese, a fragment of an underdone potato. There's more of gravy than of grave about you, whatever you are!
So goes the conversation between the two former business partners in a scene from Charles Dickens', "A Christmas Carol". Of course Marley is a disembodied spirit who comes to warn Ebenezer Scrooge to change his ways while there is still time. Scrooge thinks he is imagining the entire encounter.
Reading today's CPI numbers from the official bureau of propaganda I could not help but to think of this scene. Yes, according to the feds, those rising prices we are all experiencing in the grocery story are nothing more than "undigested bits of beef" ( I could not resist the pun).
Funny that on a day when we have to sit and read commentators telling us gold is under pressure because "inflation is benign", we watch WTI Crude Oil surge through the $100 barrel level as news hits the market that the flow of crude oil in the major pipeline that runs from the Gulf Coast to Cushing, Oklahoma will be reversed allowing oil to flow OUT of Cushing thereby reducing what has been a supply glut pressuring the benchmark for oil.
If WTI Crude continues to show strength, it is going to be a difficult trick for the gold bears to keep up any chatter on ebbing inflationary pressures.
On a different note, take a look at the composite price of wholesale beef. It scored an EIGHT YEAR HIGH yesterday! Don't worry however, this is just a figment of your imagination. The government tells you so.
Meanwhile, Commodity Prices are indeed not continuing to soar into the stratosphere, but neither are they breaking down sharply either. This index would have to fall below 560 to suggest a bear market in commodities overall is underway. Prices have retreated from their all time peak, but seem to be moving in a generally sideways pattern over the last couple of months having bounced off of the above level and moved higher. The index would need to clear 620 to suggest a period of rising commodity prices is underway once again.
That is what is particularly galling about the government's numbers. They give the impression that inflation is benign but the truth is that while the CCI has fallen from its peak, it remains at an extremely lofty level nearly 90% above the bottom made back in 2008. It is a bit of an exaggeration to say it this way but it conveys the point more forcefully - commodity prices have nearly doubled since the fall of 2008.
When you put it that way, the "benign inflation" picture does not seem quite so benign now, does it?
In private conservations with various friends I have been discussing the very real possibility of a bubble-like price increase in farm land across this nation. There are several reasons but suffice it to say that soaring grain prices have led not only farmers, but investors to hit the trail looking high and low for tracts of good farmland that they can scoop up.
Farmers acquiring top quality farm land to increase their production is a normal response to higher food prices as supply will need to increase in order to keep up with the growing global demand for food. I do however have serious misgivings when I see hedge funds, and other assorted characters seeking to capitalize on this situation by setting up vehicles designed with the sole purpose of acquiring farmland for speculative reasons. This smacks of a mania to me and today that was pretty much confirmed by a report out of a conference held in Chicago which was hosted by the Federal Reserve Bank of Chicago.
The Chicago branch of the Fed, and the Kansas City branch, both reported that farmland values increased 25% from the previous year (according to a report by Dow Jones). This was the largest increase since 1977.
I have always been a fan of the American farmer and am pleased to see these hard working folks reap some of the benefits of increasing global demand for their product as well as seeing their land rise in value, but I am very worried that this could easily turn farmers against wild-eyed speculators who are chasing land, not directly for its productive capacity and value, but rather for an investment which they can later flip to another speculator. We have all seen what these fools did to the real estate market after packaging those mortgages into so many combinations of letters of the alphabet securities (CDO's, SIV's, etc.) that one could hardly keep up with them all. What happens if we see a repeat of that folly?
Obviously, some speculative buyers of farmland will lease the land out to farmers for agricultural use but the notion of hedge fund money sloshing into and out of farmland makes me extremely uneasy. What might happen if enough of these speculative buyers amassed significant holdings of quality farm only to see a drop in value at some point down the road? Would we witness the first domino falling and setting off another chain reaction like we saw in 2008 or any other bubble that has come and gone?
Maybe - Maybe not - all I know is that the combination of hedge funds/investors and farm land does not sit well with me.
Gold has been held in check below $1800 with the bulls unable or unwilling to commit enough firepower to run the shorts out of their defensive line erected at that level. Bears on the other hand cannot get anything going to the downside either as buyers are surfacing on dips in price. The result is more of the same - rangebound trade.
Sometimes there is not much worth commenting on concerning market action and today is one of those days.
Uncertainty over European financial woes is keeping a firm bid in gold with Euro-gold above the 1300 euro level.
Please click on the following link to listen to my regular weekly interview with Eric King on the KWN Weekly Metals Wrap.
Risk trades were back on in several markets today with equities rallying, the US Dollar selling off and both gold and silver moving higher. Once again, copper was up and thus so was silver. The link between those two metals lately has been quite tight.
Gold bounced from support near $1750 and is moving back to towards $1800 once again. You might recall from the other day that I mentioned a large number of fresh short positions were shoved on at $1800 and above. We will see how those new bears defend those fresh positions. Bulls can give them plenty of headaches if they can muster the strength to push price through that recent high. Failing that, the market will see some liquidation from both floor traders and shorter term oriented longs who will note the inability to better that level and take that as a signal to book some profits.
Aiding the cause of the gold bulls is the very strong showing in the HUI today as it is currently up better than 3% and is above the 600 level on that index's chart. A strong close above this level to end the week would be very constructive on the weekly chart and would set the sector to mount a charge to the 610 level early next week. Failing to hold above 600 would discourage some of the bulls.
Initial downside chart support lies just below 580.
Thank you for your Service, Dedication, Sacrifice, Honor and Commitment to our Nation and its Freedom
The Wall Street Journal is reporting that the cost of an annual Thanksgiving turkey dinner for 10 has risen this year to $49.20; a $5.73 increase over the cost of the same dinner last year ($43.47). That is an increase of a bit over 13%.
No worries however - keep moving; nothing to see here. Our illustrious lords that "cook" the official inflation numbers will no doubt be able to deal with this by substituting quail or cornish hens for Tommy and Timmy turkey.
Gold ran into selling pressure today as both safe havens, the bond market and the gold market, were taken lower after the equity markets reacted to a supposed improvement in the US unemployment claims. Personally this number is a very poor indicator to base trading decisions upon but the equity markets are almost desperate to find some good news somewhere.
They even seized on Berlusconi appointing an interim government rather than holding elections further down the road. That was viewed to be friendly for stocks. Heck, it had people buying the Euro today?! Go figure.
Strangely enough, the hedgies were selling the commodity markets in general today with the energy sector seemingly bucking that trend but the metals and grains did not. The result was that the CCI moved lower with the CRB slightly higher, as it is more heavily weighted in energies and skewed in that direction.
Gold did find good buying below the $1750 level and is currently trading near $1760 as I write this. We'll have to see how Asia responds overnight but we certainly have some solid support and resistance levels to work off of thus far. If we stay above $1725- $1720 we should range trade with some chart resistance initially seen just shy of $1780.
The HUI was lower today but it recovered a rather goodly portion of its losses heading into the closing bell. There is chart support near 570 initially with another round of potential buying emerging closer to 565. Keep in mind that this is an index comprised of various mining companies so when I mention support and resistance levels, this is simply picking up on what is occuring in the shares of those companies which comprise this particular index.
The HUI will now have to convincingly CLOSE above 610 to see a solid trending move higher in the mining sector commence. A closing downside push through 540 would signal some additional weakness otherwise the shares look to be forging out another consolidation pattern.
