Sunday, December 13, 2009

Gold, Lithium, REE and Twelve Trillion in Debt - Macro View on Micro Caps. TNR.v, CZX.v, BVG.v, SGC.v, RMK.v,, ASM.v, MAX.v,, KTN.v,

Our Gold Bull market is intact after recent short term Sell signal and will consolidate before next Leg Up. Retest of 1000 USD/oz break out level is possible, but do not bet on it.

This is the Treasury Bubble Burst we were writing about from last year.

This is the world's largest Lithium producer SQM with only part of its revenue from the Lithium.

CS. Debt of the United States has surpassed Twelve Trillion a few days ago - it is time to put a few lines about destiny of US Dollar, Gold and pockets of Growth. This debt, which is so dangerously close to be a 100% of GDP is a small shadow of U.S. total obligations which could be as high as 114 Trillion dollars.
Recently we gave a Signal:
"We promised to give you an update on Gold Big Picture. First of all we will refer to the Chart above and will tell you that we see a Sell signal short term in the making."

Gold is in a healthy correction now: our Sell signal is confirmed. Things are not rising parabolically, if it is not the last phase of the Gold Bull. We do not think so and now it is time to buy and accumulate positions again. Gold could retest strong support of previous consolidation pattern at around 1000 USD/oz to throw you the number, but do not trade it if you do not have to.
Jim Puplava is talking this week about Gold doubling from here and Mr Gold Corp - Rob McEwen still throws his 5000 figure and makes a Junior Gold mining index. We are in agreement that it is time to rotate into Junior mining sector. After this consolidation, once investment public will realise that Gold will stay above 1000 USD/oz and it was not a final blip, money will go into Juniors, which still lack as a sector previous excitement of Bull Legs Up. Silver moves will be more dramatic, as usual, with double drivers of Inflation and Commodity High Tech Recovery play.
Economy is not rosy at all, but it is our ticket to the Growth. There is always Bull market somewhere. Debts could be only inflated away, do not bet on the Green Fellow - that this counter rally is for real. Orderly decline for Us Dollar is the name of the game.
Gold recent top coincided with Chinese calling for a Gold Bubble - they will be the buyers and keep it above 1000 USD/oz in a few months from now. Central banks become a Buyers in the Gold market with China, India and Russia now increasing positions. It will be the new driver.
For US Dollar to sustain any meaningful rally now means a strict monetary policy and rising rates to curb coming inflation. With elections in 2010, Job picture and real state of economy - it is not possible. We do not expect now Crash in stock markets either - system will not survive another Stress Test like last year, financial system is still insolvent as U.S. itself - if all obligations will be called now - they will never be met. Economy will be in this quazy living state for years to come unless there will be a default as Mark Faber tells us or shock from mortgage mess and derivative losses will be inflated away, taxed and absorbed by the system, as we think. We will live during Kondratieff Winter and will be waiting for the Spring. Any thought about Double Dip will be met with sound of printing press and Quantitative Easing full scale. Stimulus package was in the total amount close to 1.2 Trillion (Jim Puplava) and now Obama talks if not about Second stimulus package, but about Jobs Creation Program.
It is not us: political life is cynical - voters in their majority do not travel to Paris for a weekend and do not hold Gold, be it in physical form or in shares of Majors or Juniors. They will not notice, or complain for that matter, that price of French croissant with morning coffee doubled in US Dollar terms, but they will be not happy with closing schools, lost jobs or refused medical care. They will not be happy with oil above 100 USD/barrel and will freeze to death during Kondratieff Winter with oil above 200 USD/barrel as some analysts are suggesting.
Here we should talk about one Macro Event, which will be crucial for all our Micro Caps, we are writing here about: Burst of the Treasury Bubble. Governments, Institutions and people are holding them now exactly for the wrong reason: To Be Safe. It was important last year, when everybody moved into Treasuries for safety to eliminate Agency problem with collapsing banks, now when all governments back stop banking system Elvis moment for Treasuries is gone.
According to Jim Puplava next year U.S. Treasury will have to roll out 2 Trillion dollars of debt in maturity and finance another estimated 2 Trillion dollars of budget deficit in 2010. When more and more paper is coming into the market, prices are going down. Puru Saxena talks with Jim Puplava this week about FED buying 82-85% of all newly issued treasuries - we do not know, but will not be surprised. Once Treasury market Bubble will start bursting, where all these money will go?
Inflation is a function of printing press, credit expansion. Higher prices will come as a result of created money chasing the same amount of goods. Here is our Gold and Silver play as a store of value.
If these liquidity flood will find its ways into one tiny, but very important sector with Trend starting factors in place we will have our Elvis moment there. It will be pockets of Growth and magic word here is "Low Base". Growth from this place is Explosive by definition. We call it Next Big Thing - Bull market, when "Cool Factor" is multiplied by "Big If".

Tiny sector is Lithium and REE, Trend is Electric Cars and "Low Base" - there is no mass market for them yet, but they are ready and going into production (picture gallery Cool Electric Cars). We will throw few words and couple of figures to get you started:
Words: China, Oil, Jobs (for that unhappy guy at the pump with oil over 100 bucks)
Figures: 2.4 billion cars in the future - UN estimation, from today's 600 million, 12 cent is the cost of mile on gas vs 2.5 cent for Electric Car, 80 percent of Americans do not travel more then 40 miles per day.

We have promised you: Gold, Lithium, REE and Twelve Trillion in Debt - Macro View on Micro Caps - we are almost there.
Just a few more numbers to get you focus Macro into Micro:

114,000,000,000,000 Total US Governmet Obligations
265,040,000,000 Microsoft Market Cap
208,230,000,000 Walmart Market Cap
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