Agoracom

Radio interview here

Please allow me to note a financial blog a very good friend of mine has.

Financial Post Article

2008 Year in Review and Outlook for 2009

I could’ve sung “It was a very good year for me in the markets if not for one big blunder - mining and exploration stocks. Foreseeing the economic and stock market crisis in October 2007 and urging reads to sell all stocks (except those related to precious metals) and actually shorting the stock market (and covering just under 8,000 on the Dow) proved to be an almost perfect year. Unfortunately, my black eye came from the annihilation of the junior resource stocks. Even knowing what I know now, I would still find it unfathomable that these stocks could nearly totally disintegrate. It does prove one thing - I put my pants on one leg at a time just like everybody else

Those of us who fool ourselves into thinking we can predict the future on a regular basis by looking into a crystal ball really end up learning only one thing: how to eat broken glass. With this in mind, I will attempt to look out into 2009 and beyond. Keep in mind that if I had any real degree of certainty, I would be writing this from my own island in the Pacific.

The Big Picture- When it comes to the good old U.S.A., I believe there’s one overwhelming view one must take despite all the political rhetoric and “I’m okay, your okay” from the “Don’t worry, be happy” crowd on Wall Street; America is trying to operate on a failed business model. While doing so, Americans have truly mortgaged their futures on a far worse situation than the sub-prime fiasco.

While there should be more bull markets to come (hopefully in our lifetime), I think one must understand that the crisis we’re currently in is going to be just a pimple to what our children and grandchildren are facing. This 30 minute video will go a long way in explaining the disaster facing us not too far down the road. I urge, no make that implore you, to send this video to everyone you know. I know in my heart it’s true and truly a prophetic message for the 21st century. If you can’t accept these findings, I don’t believe you should take any more time reading my comments.

Okay, I assume since you’re still reading, you’ve accepted the facts, figures and estimates given in the video. The $64,000 question (if our government handles it the question could likely be $6 trillion) is, “What should one do going forward?”

Praying is a good start, really. As David Walker said in the video (Davis is America’s 21^st century financial prophet), we’re suffering from a fiscal cancer and the cure is nowhere to be found. I doubt the average American is not only unaware of this, but even if they now were, dealing with the current crisis has already been too overwhelming. I doubt very much they have the stomach to do anything about this cancer any time soon. This is only going to add to the problem in the future. Read

After you’re done praying, I think there are some cold hard facts we must make part of our future planning:

• America is a fallen empire. Its ability to be the world’s #1 economic power is gone. We’ve gone from the world’s biggest creditor nation to the world’s biggest debtor nation. When we add the tremendous debt of states, municipalities and consumers themselves, we see the American people drowning in a sea of red. This debt will greatly impair our government and our fellow Americans’ ability to operate and to live a lifestyle (Listen to video) that has become unsustainable.
• Uncle Sam is no longer the world’s favorite Uncle. In fact, to many in the world, they hope he never comes to visit again. The loss of political and economic clout may not be seen in our daily lives, but it will impair us nevertheless.
• No matter what any politician tells you, taxes can only go up. Medical costs will continue to rise sharply. Government services will either be curtailed or end. On the State and local government level, things are actually worse because they can’t print money.

Pandora’s Box is the 78 million baby boomers that have already started to qualify for Social Security and soon Medicare. As this video will show, they are going to be an economic tsunami to the Social Security and Medicare system. (Watch this video. It was made “before” the credit crisis). 60 minutes video

The financial playing field going forward is unlike anything ever faced by Americans. No matter what the financial services industry tries to portray (and the airwaves and print media is full of things can only get better predictions), the pieces that make up the playing board are mostly landmines that can wound or destroy players. Opportunities to profit will still exist but the methods used to capture them will be radically different.

2009 Outlook - What a difference a year makes. Last year at this time, the overwhelming majority of professionals and individual investors still had no real idea what was unfolding and before them. I find it ironic that the vast majority of so-called experts who are calling for a much better 2009, were the same folks who failed miserably in 2008. I guess one of these years they have to end up right.

Being the bearer of bad news is not profitable nor a way to win friends. In October 2007, when I suggested selling everything but precious metals and going short, the vast majority couldn’t phantom the coming carnage.  And, even if they thought it was possible, their advisors talked them out of it. The professional community touted “Buy and Hold” as the savior to all portfolios. “It always comes back,” was their spiel. You would think the world would beat a path to those few who had the foresight to see it beforehand. Unfortunately, most investors are like a herd of deer in the headlights and/or are hoping “it always comes back” happens one more time (then they can run to for the hills).

One of the major problems with so many people “stuck” is they will indeed be sellers if they’re fortunate to recapture some of their heavy losses. The problem there lies in how much more percentage-wise prices must rise versus what they fell in order to get whole again. Another related issue is time. It is one thing for a 30 or 40 year old person to wait it out, but so much of the nation’s wealth is held by seniors. These folks have not only seen their wealth cut in half or more but have seen decent fixed income rates fall tremendously. We also have so many people who have had financial plans that used an 8%, 10% or more rate of return target in order to reach their “dream” retirement. Those dreams are now nightmares that aren’t going to disappear overnight.

There’s going to be an ample supply of equities for sale if and when the stock market rises.

One thing is for sure, the book DOW 36,000 is now strictly a collector’s item.

U.S. Stock Market - There’s good news and bad news. The Good? I don’t see another 50%+ drop from here. If it did occur, life as we know it has gone from bad to worse. The bad? Despite an avalanche of “bottom is in, bottoming process underway, we’re going higher yada, yada, yada” forecasts, the “Don’t Worry, Be Happy” crowd is going to see membership continue to dwindle and it’s public mouthpiece, CNBC-TV, will be searching for new bulls as recycling of old ones no longer works.

On December 16, 2008, the Fed fired what history may show as their biggest silver bullet through a cannon but it did little to change the uphill battle. Yes, the positive spin will continue and be enhanced by the Obama “magic carpet ride” but the overwhelming bearish fundamentals should continue to pressure the market for the foreseeable future. A minimum retest of the lows around 7500 is likely in the first quarter and, depending on if it holds or not, will go a long way in deciding if I jump back in.

What’s lost among the sea of wounded bull cries is that in bear markets like this, not only do we see deleveraging but also shrinkage in multiples people are willing to pay. S&P 500 forecasts for 2009 range from about $65 to $80. I think the market can bare a 15x multiple at best and depending how bad things get, as low as 10x to 12X. That means the S&P 500 could see a low of 650 or a high of 960. It’s currently around 895. In this scenario, buying the dips and selling the rallies seems to be the only way to make money in equities as a whole. I do think oil equities are going to become attractive sooner rather than later. I also believe if and when equities in general are worthy, overweighting in foreign markets versus the U.S. will be the way to go (one reason for this is most countries are cutting taxes while the U.S. can only raise them. History has shown raising taxes are not good for the economy).

Gold Investment Comparison Chart

Precious Metals - TOUT-TV (CNBC) and the like continue to spew out how gold failed to fire in 2008 given all the turmoil. Let me ask you something, if your house was in the middle of a big hurricane and after it was over, it was the only one still standing and sustained no real damage, would you care about anything else?  Of course not. If one bought gold on January 1, 2008, instead of any other investment, they would still have everything they had come January 1, 2009. How many people wish all they did was break even in 2008? Gold continues to offer not only that result, but gains of 20% or more in 2009, IMHO.

Silver is a base metal but still gets bundled up with precious metals. Like in 2008, I think it will mostly follow gold versus lead it.

Platinum appears to have seen its lows and while the upside may be limited in 2009, so appears the downside.

Base metals - I’ve been bearish on them for about two years. As we begin 2009, there isn’t anything to change that view other than further declines which could bring us to the point where accumulating them for 2010 and beyond could be worthy. Stay tuned.

I do think uranium has bottomed and can work its way back to triple digits in the next 24-36 months.

Oil - I threw my hat back into the bullish camp in the waning days of 2008.

U.S. Dollar Index - I’ve had a constant saying for the last few years that “the only party that doesn’t know the U.S. Dollar is dead is the U.S. Dollar. “If I was wrong and it was only sick, trust me the trillions of dollars being created and pumped into the system was its death warrant. Pity the poor souls on Tout-TV who say the Fed will be able to remove these trillions of thin-air created dollars from the system without causing inflation. If you believe that one, you should join those who believe Elvis is still alive and on an island somewhere with Jimmy Hoffa. Look for a test of the low 70s by years-end, if not sooner.

U.S. Treasuries - The one remaining bubble that should burst in 2009 (watch). While the 10-year can still get below 2% yield, the time has come to short treasuries. We may go down before going up, but by years-end I think this strategy can be a winner. Read

Mining and Exploration Shares - Can it get any worse? Since I didn’t think it could be this bad to start with, maybe I’m not the person to answer this. I do know gold is doing well, mine production is falling, new big discoveries are few and far between and someday juniors will be needed again to do the grunt work (hopefully in my lifetime).

I’m gathering updates from our client companies and hope to bring them to you ASAP.

Closing Comment - Most of us have made another set of resolutions for 2009. And most of us will sooner or later failed to keep them. Why? I believe it’s because we try to do it with our own strength, not God’s. Never in the history of mankind has the world seem on the wrong path. Many will suffer. I truly believe the only saving grace comes from the Creator of all that was and is good in the world.

They say you can’t guarantee anything but death and taxes. I’m going to guarantee you one more thing; Trust and love God with all your heart and do the same to others and life will become much easier and enjoyable no matter what.

“Put your hope in the LORD, for with the LORD is unfailing love and with him is full redemption.” Psalm 130:7

Watch here

Listen here

Barring anything major in the markets, this should be my last update for 2008. Rest assured if something of significance does break, I will address it.

U.S. Stock Market - I noted in my December 16^th update that a 1,000 point move in the DJIA was possible after Bernanke threw his latest “Hail Mary” pass and the “Don’t Worry, Be Happy” crowd on Wall Street was hailing it as the “Second Coming” (even though it was the umpteen time they have said so). I noted that despite all the cheerleading and pom-poms by them and TOUT-TV (CNBC), the market had still not managed to get over 9,000.

In just five trading days, we’re already halfway to the 1,000 point move. This time around a sharp five day decline took place in a virtual silent-mode and is now lower than where it was when the Fed shot what may be their last silver bullet through a cannon.

8,000 is the next key support area so stay tuned.

Oil - I’m on the bullish side again at $36.50. Some momentum indicators of mine are suggesting the decline is losing steam and oil is deeply oversold. I continue to shy away from oil stocks until such time I enter the long side of equities in general and/or oil breaks to $30 or below.

Gold - Very thin market conditions so don’t make much of any pop or pull back until the New Year.

U.S. Dollar Index - The bear market rally has been crushed and sometime in 2009 we should be seeing the lows of earlier this year tested.

I continue to avoid base metals, but like silver and uranium.

I’m hoping for all our client companies to bring us up to date by early January. I will then update you.

Some interesting reading

Please Note: Our offices will be closed from December 24^th to January 5^th but I will continue to post on the blog from time to time.

U.S. Stock Market - Did this guy steal the “Santa Claus” rally or was it all compacted into last Tuesday’s hoorah on the Fed’s announcement?

Far be it for me to ruin the holiday spirit but I can’t help but to point out that the market fell three straight days after the “Hail Mary” pass by the Fed last Tuesday. Before we break out the eggnog and hang the mistletoe, it’s also worth noting that the market failed again to get above 9,000 and is now close to the last low of 8480 made after the previous test of 9000. A close below 8480 could suggest we’re going to need to re-test the lows around 7500. If this is to occur, I think it would be in January as the market environment is going to be very thin until January 5^th.

I find it disturbing the Treasury has used up the first TARP allocation already and is back asking for the second part. We still have no real idea who has received it. If we do start to head back to the lows, the Fed’s announcement this past Tuesday should look more and more like another failed strategy to right the sinking ship. Stay tuned.

Gold - Has consolidated its sharp recent gains as expected and it too will go into thin market conditions until the New Year. Here are a couple of videos about gold and mining shares.

Oil - Read this from yesterday.

U.S. Dollar - It too corrected its sell-off as anticipated. Yes, thin markets to New Year’s as well

Some of us have speculated that a key reason why banks are not lending is they know another big shoe is only now just starting to fall hard - commercial real estate. Listen to this video

Keep an eye on the 10-yr. Treasury Note. I think if it can break below a 2% yield, an opportunity to short it could prove to be a winner a year or so from now. There’s ETFs to use so stay tuned.

I will be on “Market Call Tonight” on Dec 30^th www.bnn.ca

As noted a few weeks ago, we were entering a highly seasonably favorable period of the year for the stock market; A.K.A the Santa Claus Rally. The mortally wounded bulls are hailing this as yet another bottoming process. I can’t remember if this is the ninth or tenth one (there’s been so many all the way down from 14,000 on the Dow). While the DJIA rally has been contained under 9,000, one could start to argue a reverse head & shoulders is forming (a bullish pattern). If not for the horrific economic picture, I could buy into this development. I continue to hold onto my feathers as I sit this out in my chicken coop.

Gold has rallied nicely off dollar weakness and continuing strong physical buying. The “Talking Heads” on TOUT-TV can knock gold all they want (and they do) but it has held its value through 2008. I bet these salespeople/anchor personnel wish their 401k did as good. Let’s see how well gold does when the dollar consolidates its losses.

U.S. Dollar - The top I called for appears to have been put in. We can see some consolidation this week but make no mistake about it, Uncle Sam’s paper is only going to get cheaper in 2009

Oil - Things are getting quite interesting. We fell from $140 to $50, which was an area of support. It hardly bounced off $50 before breaking down and heading straight to $40.50. I said that was a multi-year major support zone. Oil was deeply oversold and the rally back to previous support at $50 was a typical technical pattern. The failure to hold $50 and fall back to $45 strongly suggests that unless OPRC does something beyond dramatic, not only is $40 likely to be tested again, but it may break that support as well. Stay tuned.

Interesting article on mining shares

Speaking of mining shares, two of my biggest personal holdings and companies I highly profiled, had news today:

• Mitsubishi Corp. Surpasses 10% ownership in Northern Dynasty (AMEX: NAK)

http://www.sec.gov/Archives/edgar/data/877197/000095014208001986/sc13ga2_ndm.htm

What’s interesting about this filing is to go from 9.9% to 10% was only a buy of 1,500 shares. The cost to file this action cost more than that. The rule is once you hit 10% you’ve to file on any increase that takes you up another one percent or more. This means if and when they acquired 11% they have to file. Then 12% and so on. It’s just my guess but I anticipate we’re going to see another filing before too long. They can go to 19.9% without triggering NAK’s poison pill.

• Geologix Explorations (GIX-TSX) announced the following; There’s no question that the credit crunch has hampered the ability to raise capital and/or structure a deal that can complete the purchase of the option. Having just 60 days makes it more paramount. There’s nothing to do but await the next 60 days and see what management is able to do. 

Oromin Explorations continues to discover and develop multiple major deposits in West Africa. This past Friday they announced a new discovery that in the good old days when there was a junior resource market, would’ve caused a sharp rise in the share price. Never-the-less, OLE continues an aggressive drilling campaign and a new resource estimate due out should greatly enhance their assets.

The company will begin trading on the TSX on December 16th

U.S. Stock Market - I said going into Thanksgiving week the stock market was at oversold levels normally seen at or near a bottom. In fact, I was looking to get back in if there was a washout the Friday before turkey day. I noted both the week of Thanksgiving and the month of December is a highly favorable seasonal time for the market. However, with the economy getting bleaker by the day, I remained on the sidelines. People are asking me did I miss the bottom. My response is you can go broke trying to catch it. From 14,000 down, widespread calls for a bottom were a daily occurrence and if the previous low held for more than a few days or weeks, the street said that the bottom was in. They continually marveled how the market ignored bad news (like today) only to eventually take out the previous lows. Now the low around 7500 is being hailed as the bottom. For the rest of 2008 and perhaps as long as into March, it may hold. Most of the distress selling appears over for now. Despite a bad year, the Santa Claus rally will be the theme for the next couple of weeks. Then in January, all eyes will be focused on the inauguration of Obama. The natural human response will be a sense of renewed hope and the “Don’t Worry Be Happy’ crowd will play that up big time.

But before you break out the party hats and horns, let me play Scrooge and bah-humbug happy days are here again.

Much of the bullish reasoning (what’s left of it) is that we know we’ve been in a recession for a year and recessions normally never last more than a year or two. The market has always come back and this time won’t be any different. I believe the fallacy of this theme is this is not a typical recession where we’re going through a normal cyclical downturn. It’s an once-in-a-lifetime life or death mess that still has no end in sight and gets worse as time goes on. Another critical difference is we were a creditor nation through most recessions and now we’re the world’s largest debtor nation. In past recessions, the average America was not indebted up to their ears, had savings to draw on and wasn’t living anywhere near beyond their means as they were entering this mess. We’re also no longer a major industrial nation but now one that depends on large-scale consumer spending. Where does the consumer get the money now to spend? The stock and real estate boom is over. No longer can the American home be an ATM. They have no or little retirement savings and there’s no way easy credit is coming anytime soon. And I believe many Americans, especially those over 55, who are really scared now, are going to take the attitude of “Fool me once, shame on you. Fool me twice, shame on me” and become far more conservative of what’s left of their wealth.

I believe the course taken so far by government is similar to what Japan did after their stock market topped out near 40,000 (now under 8,000 twenty years later). They added massive liquidity, allowed interest rates to fall below zero, cheapen their currency, yet spent almost half of the last twenty years in recession. And they had substantial savings versus our mountains of debt.

I agreed that we’re not going to see another 50% down so if you want to join the crowd and say the worse is over, it’s okay. But to expect any major sustained rise where in a year or two all or most of losses are erased is foolhardy. What I do think is possible between now and March is a wide trading range of 7,500 to 9,500.

Interesting reading:

• Record Number
• Eight largest economy sinking fast
• IOUs
• Rise to Record
• Ponzi Scheme

Gold “A battle won is a battle which we will not acknowledge to be lost.” - Ferdinand Foch

It’s not easy being a gold bug these days. While gold has certainly held its ground in 2008, the combination of it not making much progress to the upside (with all the news we’ve been told would drive it higher) and the fact mining shares have been crushed, makes one feel gold has performed as bad as the Talking Heads on CNBC claim. Perhaps the most frustrating aspect has been the tremendous physical demand for gold while the paper market can’t get out of its own way.

It’s become fashionable for some to make fun (every day) of a small camp that has pounded the table about manipulation in the gold market. The track records of those who say nay to manipulation leave much to be desired. John Crudele, a writer for the NY Post, has a tremendous record of being ahead of the crowd when it comes to uncovering the truth and seeing where things are really heading. He wrote a great column about one of the regular smears CNBC does to anyone who dare claim markets are not fair and honest.

$700 continues to be the bottom in my book and despite seemingly the whole world against gold, I think it’s only a question of when, not if, we go to new all-time highs.

Interesting Reading

• GlenN Beck $2,000 gold
• Israel/Iran
• Losing

U.S. Dollar - I truly believe the Talking Heads can’t read charts. All I keep hearing is how great the U.S. Dollar is doing. It’s right where it was in October. If that’s progress, I can’t wait for a decline. I continue to believe shorting the U.S. dollar is a worthy speculation.  Link

Oil - As anticipated, oil broke down under $50 and fell sharply towards $40. As you can see, $40 has once been key resistance but has been key support on more than one occasion since then. If the economy didn’t appear to be accelerating to the downside worldwide, I buy first thing Monday morning. My thinking is this; Risk is $10 or so to the downside. If we went that low new exploration or increased development of existing projects would grind to a halt, which would give way to a bottom. Upside over the next 3-5 years is $100. Long time readers know over the last few years I said the “Peak Oil” theory was right, but it was not going to take hold until the next economic cycle. I feel more certain about that now than ever before. So, I’m going to see how we trade day to day hour to hour and will send out an alert if and when I feel it’s time to take the plunge.

Interesting Read

• OPEC
• Opportunity knocks
• Mergers

Mining and Exploration Shares - “An expert is a man who has made all the mistakes which can be made, in a narrow field.” Niels Henrik

That’s me when it comes to this industry in 2008. While I avoided base metals for almost two years, I fell on my face in the juniors. I have no excuses other than the boat I’m in is overcrowded. What I’m concern about is talk within the boat of throwing me overboard.

Little or nothing should happen here until the New Year. One piece of great news was Northern Dynasty’s resource update. It was fantastic. If there’s ever a metals market again in our lifetime, NDM should greatly prosper (where did we hear that before?).

Last Thursday evening I spoke about the U.S. stock market was seriously oversold and bearish sentiment was at extremes seen at or near bottoms. I was prepared to go long if Friday opened sharply lower. It didn’t. The market rose for two days in a row, the first time this happened this month. Did I miss “the” bottom? I don’t think so.

The economy is in virtual free-fall. Everything that could go wrong is. Meanwhile, our government has gone into overdrive, no, make that warp speed (Scottie) in its attempt to right the sinking ship. Ring the cash register again; only let’s not forget we’re taking money out, not in. Where does it all end? Now homebuilders want to be bailed out (get in line). Who else can Uncle Sam look forward to coming hat in hand?

While the “Don’t Worry, Be Happy” crowd cheered today’s news and called this the “umpteen” bottom, the U.S. Dollar was smacked hard. Why? Read:

• Link
• Link

The world realizes that all this newly created money has to be borrowed. We’re already indebted up to our ears. The economy is in deep recession and it’s looking more and more like the worse one since the Great Depression.

As you can see ever since we hit the waterfall in September, all the calls of “the” bottom have proven to be wrong. While this current bear market spike up can carry us to the last peak at 8923 or even to the 50-Day Moving Average around 9300, it would come as no surprise to me that we start heading down again despite a seasonally favorable period this week and in December. Therefore, I continue to urge no equity holdings except those related to precious metals and short the U.S. Dollar.

Gold had two great days and while some profit taking the next couple of days is healthy, the fundamental news continues to suggest higher is the path of least resistance. We continue to hear of tremendous physical demand while mining supply wanes. I will go as far as to suggest the crimenex is going to get what it long has deserved - their shorts squeezed!

Oil held key support just below $50 and enjoyed a very oversold rally. Don’t get caught up in it as it still looks like it eventually wants to go towards $40.

U.S. Dollar - If not for the tremendous unwinding of short U.S. dollar trades around the world that had to be unwound, the U.S. Dollar Index IMHO would already be under 80. It’s only a question of when, not if. I believe it will eventually make new lows under 70 in the first half of 2009.

Interesting Speculation - Hudbay Minerals (HBM-TSX $3.31) http://www.hudbayminerals.com/ could be a good flyer for speculators. The stock was $19 earlier this year and sold off sharply with the rest of mining stocks. It recently announced a bid for Lundin Mining, a bid I don’t think is a good move (and the market seems to agree). A Canadian brokerage firm is leading a move to remove Hudson Bay’s board, distribute the cash to shareholders and sell the assets. The cash alone is worth more than the company is now, which means you get the assets for free. I think this move can work and I also believe we could see one or more new suitors show up. I think the downside is limited while upside could be 100% or more. On any weakness back under $3 would give me more reason to take a shot. Very Interesting video and also news story

Special Note of Interests

• I enjoyed meeting several readers last week at NY Giants David Tyree talk at Montclair University. I previously noted how David has not let the fame of “the catch” change him at all. He continues to champion his faith and this email received by an attendee is what made the day so worthwhile 

Hi Peter Once again, I would like to thank you for inviting me to such an eye opening event at Montclair University to hear Super star David Tyree speak.  I feel blessed to have met you and I can’t tell you after you helped me with getting my football signed, I actually met David face to face and after he signed the football, he came right up to me and said you (meaning me) need to open to God.  I couldn’t believe he said that with such heart and feelings, I looked him straight in the eyes and said your right. He grabbed my both hands and asked me to pray with him.  I can’t explain what came over me; but my chest was pounding yet felt so light.  Since yesterdays experience I truly feel different and happier as if something was lifted. 

Of course I still have all the problems many of us are facing with today’s market but I feel as if I can handle things better.  I want to thank David for his spiritual love and kindness. He is a special man. May God always stand beside him.

 As you know I have been meeting with David Suckey and have another meeting with him in two weeks. I am not as scared as I was before and have faith that everything will fall into place that is the right place. I know we will meet again and I look forward to the many future events.  I also want to help out with the Giants and the children.     Tyree Family with PG

• A Christian pastor calls his married flock to have marital sex for seven straight days. I showed the article to my wife and we voted. It was a split vote.