Chart of the Week – When is a default not a default?

Stock of the Week – Junior miners on the upswing

D.C.

This week…

• The big news on the week was the announcement by Fed Chairman Ben Bernanke that interest rates would be kept low until 2014 and that there was now the real possibility of a new round of QE.

• This sparked a rally in the stock market, the bond market and the gold market.

• The stock market faltered at week’s end as economic numbers came in weaker than expected.

• Bond remain below recent levels and a failure to break to new highs could instead see a sell-off in bonds rather than a further rally. There are, however, some expectations of interest rates falling lower with projections of 1% for US 10 year Treasury notes.

• Gold, silver and the gold stocks enjoyed a strong up week. QE and low interest rates are music to the gold markets ears.

• The US$ was the victim of the announcement as it fell and the Euro rallied despite downgrades of Italy and Spain by Fitch. However, some expectation of a debt agreement with Greece and lower rates at bond auctions for Italian and Spanish bonds helped.

• The events in the Gulf remain in the background. But there is another existential threat in that Iran is moving away from accepting US$ for settlement for its oil. This would help Iran get around US sanctions. But it is also a threat to US$ supremacy as the world’s reserve currency. Some have tried that before. **Important must read**.

• Oil prices rose and natural gas bounced back. The energy stocks were mixed. Tension in the Gulf should help keep a bid on oil prices.

• The TSX Composite was up on the week but it was gold, energy, materials and metals that led it higher. All other sub indices were down on the week underscoring weakness in the market.

Note: I am away this coming weekend, however, I will be attempting to put out at least a shortened TC although it may not have the charts and may come later.

D.C.

Chart of the Week – CPI adjusted gold

Stock of the Week – The overlooked precious metal and its representative in North America

D.C.

This week…

• For the third consecutive week of 2012 the stock markets closed higher. The markets also closed over 1,310 an important resistance point. If the markets can hold this level this coming week then the odds increase that the market would move higher. This is fitting with cycles that show the first quarter could be positive. The question is will a short covering stampede get underway that could in theory push the markets back to the 2007 highs?

• As the stock markets rose (risk on) bonds sold off. An improving situation in Europe and better than expected economic numbers helped push bond yields higher (prices lower). The Cdn bond market also sold off and a stand aside signal was seen for the bond model system.

• Gold and silver were up on the week but the gold stocks sold off. This is a divergence. The gold stocks were also lower despite an up week in the markets. Someone is wrong. The question is who. Based on other observations it could be gold stocks. The US$ sold off as the situation in Europe improved. Could the US$ be topping?

• Oil prices sold off as it reacted to slower growth in Europe and a drop under 50 for the important Chinese manufacturing index. This indicates a possible slowing in China. Natural gas prices fell once again to new lows. Too much supply and warm weather. NG prices are back where they were in 2002 and not far from 1999 levels.

• The TSX Composite was up on the week despite the weakness in the golds. Most of the sub indices were up on the week.

D.C.

Chart of the Week – St. Louis Fed charts.

Stock of the Week – an overlooked REIT?

D.C.

This week…

• The story of the week was the downgrade of France and a number of other European countries by S&P. The result was that the rally in the stock market that started the first week of January was at least temporarily halted. It was interesting to note that despite being down sharply after the announcement on Friday the stock markets rebounded back and while still down they were off their lows. This could bode positively for the coming week. If the markets can hold their gains past next Friday odds increase that the first quarter could be positive.

• US bonds rallied this past week on the news of the European credit downgrades. The important thing to keep in mind however is that 4 weeks there was a key reversal week for US bonds. This suggests that a top may be in. Unless new highs can be seen then the focus would have to shift to the downside for bonds (rise in yields).

• Gold and silver and the precious metals stocks were up for the second week in a row. The other precious metals, platinum and palladium, and as well copper had strong up weeks. The US$ reversed and closed higher on the week following the European credit downgrades. But gold traders are turning bullish and there was record demand in China in the last quarter and sales of American Eagles were strong the first week of the New Year.

• Oil prices fell on the news that Europe would delay by at least 6 months any embargo on Iranian oil while they seek new sources. Japan has also reluctantly agreed to go along with the embargo but they too need to seek new sources. China still objects. Meanwhile there was no particular news on the sabre rattling between the west and Iran. Another Iranian nuclear scientist was assassinated and accusations flew that the CIA was behind the assassination. Warships continue to move into the area and the Mediterranean near Syria. Not only are British, French, US and Canadian warships moving around Russian warships are also moving into the area. It is to say the least getting crowded and that increases the risk of an accident turning into a real war.

• The TSX had a small gain on the week but it was tempered by the news out of Europe.

D.C.

Chart of the Week – The Mega Bears.

Stock of the Week – Seeking yield? A somewhat recession proof business.

D.C.

This week…

• The first week of the year was positive. The January barometer says that if the first 5 days of the New Year is up then odds highly favour an up year. Watch Monday carefully. Still the down years for the most part had a war theme in the background and lurking in the background is Iran. As well some Democrats are very concerned about Obama’s recent signing of the National Defence Authorization Act (NDAA) that included clauses that could effectively turn the US into an enemy combatant zone.

• US bonds fell this past week but Cdn bonds eked out a small gain. The job numbers looked good but were they?

• Gold rose this past week even as the US$ Index broke out over 80. There have been periods in the past the most recent being in 2010 when both gold and the US$ rose. Rising gold even as the US$ rises means all currencies are losing confidence against gold.

• Oil prices rose on sabre rattling in the Gulf between Iran and the US. While US military is clearly superior (along with Israel) a breakout of war in the Gulf could have serious global ramifications. This is far more dangerous than Iraq in 2003.

• The TSX Composite rose as gold, metals and energy rose. These 3 have been the positive themes of the past decade and they should continue to be the positive themes going forward.

D.C.

Subject: Why Rising Debt Will Lead to $10,000 Gold

A presentation by Nick Barisheff President & CEO of Bullion Management Group at the 18th annual Empire Club Outlook luncheon January 5, 2012/Toronto.

D.C.

A new Scoop to start the New Year.

D.C.