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Crocodile Laurie


G'day mates

Gold $418 Silver $7.70 Oil $37.50ish Noon NY, March 24

"U.S. financial imbalances are enormous, unresolved and growing." - Pierre Lassonde, King of Newmont Mining.... 24 MARCH 2004

And so another Central Bank puppet comes out jabbering about what interest rates, GDP and currencies might/could/should/possibly be. The market just won't learn. There is nothing these clowns can do to reverse their monetary policy madness without serious consequences, globally. And so the Euro goes for a slide along with most other currencies especially the poor old Kiwi dollar. Euro sub 1.22 seems a bit of a gimme to me but who knows, 10 minutes is a long time in the currencies.

Someone took the big stick to the sheep-shaggers today but that's a currency I'm pretty comfy with especially as they are a primary produce focused economy. Real assets? New Zealand's got heaps...4 million people - 130 million sheep, agriculture, aquaculture, mining, water, sand flies, power generation, big trout to fish for and they're a pretty handy bunch of rugby players..... of course no self respecting Aussie would ever say anything nice about the Kiwi's!.. (the beer's pretty good too!)

Gold held pretty tough and would have lost $10-$12 an ounce had it followed its form of the last few months. That it didn't crap out is reassuring but then again there is still 1 hour Comex to go. That the Euro CB raises or cuts rates by 25bps or so means diddly-squat in the grand scheme of things. It certainly isn't gonna change an ounce of gold or silver or copper or a barrel of crude or any other "real asset", maybe just the number of pieces of paper you have to hand off to get some.

I see the chatter on the Buzz and Banter between Profs Fleckenstein and Succo talking about the credit delinquencies increase in the midst of Greenspan's great recovery. These gents are all over what's wrong out there. Listen to them! Certainly, someone, somewhere in the real world, will start to join the dots and start asking some questions about all the anecdotal evidence that suggests this "recovery" is a mirage. The evidence is irrefutable. No jobs growth, record bankruptcies - delinquencies, housing bubble, equity destruction via home loans, the debt bubble, reckless monetary expansion by Central Banks at record low rates (all at this advanced stage of the "recovery".. Yeah right!)... and add about another 50 other bits and pieces that I won't want to bore you with. Anybody want to run with that one???

My mates at Macquarie Bank in their daily report viewed yesterdays Gold action in NY with the following... "the lower levels on the open were considered merely another buying opportunity for funds".... Funds again. Hmmm.

Gold was solid today in Asia hovering around the $418+ all day and early in London a large US Investment bank sold aggressively knocking a couple of bucks off. The absence of fund buying was noted although I have a sneaking suspicion there's a stack of cash ready and waiting to have a crack at the yellow stuff. Maybe they'll turn up at 12 noon again. Mr Trichet of the ECB then spilled his guts and a test of the $415 level eventuated. Thank you, sir.

Silver is trading in very thin volume and is jumping around violently as a result. Small volume is pushing the market around 5c at a time. There is a very good paper written by Ted Butler on the current silver situation, as he sees it. I can't see many flaws in his argument or analysis and suggest anyone with even a passing interest in the metals markets should read it. It can be found at in the archive 22 march-27 march 2004. How many people are aware that there is a Silver Users Association?

The CRB is off a couple with the energy complex leading the way lower. Interestingly the 'agri' components were higher. Sugar over $7 might alarm some. Seems that there are some out there who reckon there's some very unfavorable weather systems which could well effect crop yields adversely. And a serious possibility of a mega-drought also hangs over the head of the CRB. It will be interesting to see how these price rises are explained away without any inflation discussions or debate.

I see lots of talk about Oil. Will OPEC do this or wont they? Who gives a toss? The issue in energy is the lack of investment by refiners over the past 30 years. Refineries are attempting to increase capacity or rework their production profile. The capital cost will be massive. There's plenty of crude about to satisfy demand but there isn't in the refined products like Gasoline, Gas oil (commonly known as Diesel), Kerosene (or jet fuel). The lighter and sweeter the crude (lower sulfur etc) the easier it is to crack into the refined products. The problem is that OPEC produces mostly crap crude oil. It is heavy and sour and costs more to crack into real stuff we can use. (Vietnam has A grade crude, just for your info and they aren't in OPEC although they are very cozy with the Russians through some JV's.) Refineries globally are exploring additional hydro-cracking facilities that will turn residual fuel (or blacks) into high end distillates (whites) like kero and diesel. These things don't grow on trees and there's not much change from a few billion bucks to do this. A whole new refinery would cost a bomb but then again maybe "Weimar Ben" can just run the presses and hand out some "money". Malinvestment/underinvestment over many years in energy has led us to this juncture. Big trouble brewing in energy I fear.

The HUI is looking a little dodgy especially when comparing to the levels of early January. I am watching the short interest in some metal stocks and they could easily be squeezed, as I suspect has happened with Golden Star Resources (GSS:NYSE) the past few sessions. Equity valuation versus underlying commodity price move hasn't made sense for some time. Some of the juniors are flying for sure, but remember that so many of them will amount to nothing. Beware the touts and promoters. Bre-X wasn't that long ago. Know your stuff, question management and broker assertions if they seem unreal and don't throw dollars at a "tip". Tips are worth what you pay for them. Nothing. Check previous commodity booms, especially the 1970 Poseidon Nickel Boom here in Australia.

Enjoy the rest of the day...

position in gold, silver, gss

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