Green Shoots or Putin Power?

June 13, 2009 Company Profiles, Gold Investment, Politics No Comments

“Green shoots or Putin power? Today we examine where the media and the dollar are taking us and why the choice is between “green shoots” and Putin power. Putin power is not in his military, rather in his belief that the U.S. Dollar is going down and gold backed currencies are the answer.

QUESTIONS?

Where are we headed now? “Correctionville” without a doubt. This attempt at $1,000 per ounce gold fizzled at $980. And after Friday’s drop of $16.20, gold ended the week at $938.30. Is it time to panic? Not hardly! It’s time to watch the charts and pick an entry point for the gold stocks that you are interested in!

I talked about Novagold (NG) and NewGold (NGD) last week and things are looking a lot more interesting today. If gold is hit hard on Monday I plan to ease in and pick up some shares with the cash that I pulled off the table during the run up to $980 gold. Depending on the market action I will ease in and grab some shares on the way down. If gold is up strongly, I will wait for another opportunity. Here are the charts on these two prospects as of the close on Friday.

3 Month Chart NG 061209 Green Shoots or Putin Power?

This could be a good spot to start picking up some shares of NovaGold in case this correction is not too long and deep. NovaGold added 14.7 million ounces of gold to the reserves of its Donlin Creek property, which it owns jointly with Barrick Gold. The mine is expected to produce over one million ounces of gold annually for 20+ years. I am starting to like this one a lot!

3 Month Chart NGD 061209 Green Shoots or Putin Power?

The same goes for NewGold. When the real condition of the dollar becomes known this stock will really move!

LET’S TALK ABOUT THOSE “GREEN SHOOTS”.

Every outlet of the U.S. News media has consumed the Kool-Aid and is singing the praises of the “green shoots”. Whatever happened to the days when the press actually investigated the stories rather than printing them as soon as the White House handed them out? I guess investigative reporting goes out of style when your party takes over the reigns of power. The least they could do is throw in one contrarian opinion every 29th of February in the interest of “fairness”. The state run media in this country is a total waste of time.

The Wall Street Journal brings us a glimpse of another viewpoint in this piece.

Roubini: Those are yellow weeds, not green shoots”.

The still-pessimistic Nouriel Roubini offers Nine Reasons for Pessimism:

First, employment is still falling sharply in the U.S. and other economies. This will be bad news for consumption and the size of bank losses.

Second, this is a crisis of solvency, not just liquidity, but true deleveraging has not really started, because private losses and debts of households, financial institutions, and even corporations are not being reduced, but rather socialized and put on government balance sheets. Lack of deleveraging will limit the ability of banks to lend, households to spend, and firms to invest.

Third, in countries running current-account deficits, consumers need to cut spending and save much more for many years. Shopped out, savings-less, and debt-burdened consumers have been hit by a wealth shock (falling home prices and stock markets), rising debt-service ratios, and falling incomes and employment.

Fourth, the financial system, despite the policy backstop, is severely damaged. So the credit crunch will not ease quickly.

Fifth, weak profitability, owing to high debts and default risk, low economic and thus revenue growth, and persistent deflationary pressure on companies margins, will continue to constrain firm’s willingness to produce, hire workers, and invest.

Sixth, rising government debt ratios will eventually lead to increases in real interest rates that may crowd out private spending and even lead to sovereign refinancing risk.

Seventh, monetization of fiscal deficits is not inflationary in the short run. Slack product and labor markets imply massive deflationary forces. But if central banks don’t find a clear exit strategy from policies that double or triple the monetary base, eventually either goods-price inflation or another dangerous asset and credit bubble (or both) will ensue.

Eighth, some emerging-market economies with weaker economic fundamentals may not be able to avoid a severe financial crisis, despite massive IMF support.

Finally, the reduction of global imbalances implies that the current-account deficits of profligate economies (the U.S. and other Anglo-Saxon countries) will narrow the current-account surpluses of over-saving countries (China and other emerging markets, Germany, and Japan). But if domestic demand does not grow fast enough in surplus countries, the resulting lack of global demand relative to supply or, equivalently, the excess of global savings relative to investment spending will lead to a weaker recovery in global growth, with most economies growing far more slowly than their potential.

So, green shoots of stabilization may be replaced by yellow weeds of stagnation if several medium-term factors constrain the global economy’s ability to return to sustained growth. Unless these structural weaknesses are resolved, the global economy may grow in 2010-2011, but at an anemic rate.

So, by mentioning some common sense points you are “the still pessimistic” rather than the logically analytical presenter of a different take on the same story. At least we can still find these opinions in America, even if we have to search them out rather than tune in to the TV news media. Keep in mind, that the worse the economic situation gets, the accessibility to opinions that do not follow the government line will be slowly extinguished. I hate to mangle a good quote, so with apologies, it goes something like this. Dissenting opinion requires freedom of speech while the majority opinion does not by it’s very definition. If anyone has the exact quote, I wish you would send it to me because I think it is going to be very important in the near future.

Putin’s Power Play

I have discussed the future of the U.S. Dollar in these articles until I am blue in the face and I am coming to the conclusion that Vladimir Putin is one of the few out there who gets it. Russia may not be capable of putting the ruble on the gold standard(that will be China’s undertaking first), but they can impact the dollar in other ways.

Russia May Swap Some U.S. Treasuries for IMF Debt

By Alex Nicholson

June 10 (Bloomberg) Russia’s central bank said it may cut investments in U.S. Treasuries, currently valued at as much as $140 billion, a week after China said it may reduce reliance on the dollar and American bonds.

Treasuries fell after Alexei Ulyukayev, first deputy chairman of Bank Rossii, said some reserves may be moved into International Monetary Fund debt. The yield on the 10-year note rose six basis points, or 0.06 percentage point, to 3.92 percent as of 8:27 a.m. in New York, according to BGCantor Market Data.

Finance Minister Kudrin said on May 26 Russia will buy $10 billion of IMF bonds from the reserves and China may buy as much as $50 billion, IMF Managing Director Dominique Strauss-Kahn said yesterday. Some investors are wary of U.S. assets because the budget deficit is projected to reach $1.75 trillion in the year ending Sept. 30 from last year’s $455 billion, the Congressional Budget Office says.

These are small cracks in the dollar dam that should be noted. No fiat currency lasts forever and especially one that is printing new dollars at the rate that the U.S. is printing them. One trillion dollars of new debt in less than six months and no one in the current administration thinks that there is any problem at all. We are in for a mighty fall and the one who is pointing it out is the former head of the KGB, Vladimir Putin. Who’d of thunk it?

After this Russian announcement, the Japanese came out and threw their cards out on the table. The driving news this Friday is the story concerning commentary from Japan’s Finance Minister, Kaoru Yosano whose conclusion that his nation’s confidence in U.S. government debt is unshakeable has boosted appetite for the dollar. The dollar was once again re floated and sent upwards almost as if the powers that be could not stomach any more loss in value of the dollar. Before long words alone will not keep the dollar’s ship above water.

Now back to Putin who is making more and more sense. I added the bold type in the last paragraph of this article.

By LAURIE KELLMAN Associated Press Writer
WASHINGTON June 11, 2009 (AP)

The No. 2 Republican in the House on Thursday compared President Barack Obama’s plans for the auto industry to the policies of Russian Prime Minister Vladimir Putin, saying the White House has stripped credit holders of rights and given them to Democratic allies.

“They said, ‘Set aside the rule of law, let’s strip secured creditors, bondholders, of their rights. Take them away outside of the bankruptcy process and give them to the political cronies and the auto workers’ unions,” Rep. Eric Cantor, R-Va., said in an interview with The Associated Press.

ap Eric Cantor 090610 mn Green Shoots or Putin Power?

“It’s almost like looking at Putin’s Russia,” added Cantor, the GOP’s House whip. “You want to reward your political friends at the expense of the certainty of law?”

The Obama administration this week set bonus limits on companies that have received billions of dollars in federal bailout money and appointed a “special master” with power to reject pay plans he deems excessive.

Conservatives eagerly compare such government “meddling” and Obama’s governing style to leaders half a world away.

“Like Obama, Putin has a fawning media that is intimidated by an uncertain marketplace and looking for any help to stay afloat,” John Feehery, a conservative consultant and veteran House Republican spokesman, wrote Wednesday on his blog.

At least there are a few conservatives out there who won’t drink the Kool-Aid and are not afraid to speak their mind. All I ask for are a few good men with common sense. Speaking of one, here’s Rush Limbaugh commenting on Putins Davos speach back in February.

This reminded me of reading Superman comics when I was a child. Bizzarro world has finally come into existence. How far are we off course when Vladimir Putin makes more sense than the U.S. President? We need a course correction and we need it soon or we will follow in the Soviet’s footsteps down the road of socialism which has never worked anywhere in the world. Perhaps this is why Putin is so interested in pointing this out to the U.S. He knows that if the U.S. loses it’s superpower status, there will be no one with the strength to combat the evil that approaches the world in the form of radical Islam.

Gold is more valuable now than it has ever been, and I am not talking about the price. Vladimir Putin knows the value of a currency backed by gold as do the Chinese. They are not going to wait long before they step back from the economic brink that is the black hole of fiat currency. We need to do the same. If the government won’t do it, then you should do it in order to protect your wealth. Buying gold, silver coins/bullion and gold and silver stocks on dips will position you to preserve your wealth and profit while others are losing value daily. The question is, do you believe in “green shoots” or Putin power?

Putin power is not in his military, rather in his belief that the U.S. Dollar is going down and gold backed currencies are the answer. He gets it, why don’t we!
Till next time, good luck and good trading!