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The Warrant Report

New Warrant, Gartman & more...
July 9, 2008

We welcome all readers who have joined us for The Warrant Report.

This morning we have gold trading just under $900 an oz and silver at $17.31, both down slightly from Friday's big up moves and we see many opportunities for shares and/or their long-term warrants.

Subscribers were recently informed of a new 5 year warrant trading on a coal company. If you subscribe now you will see the company listed on the Subscriber Login Page.

Recent comments from our friend J.Taylor:

Long Bond Weakness Has Fed Worried

"It was obvious to me early last week that the Fed was becoming very concerned about the decline in the bond market, because for the first time in a long, long time, the Fed began to talk about the need for a strong dollar. Wall Street was so gullible that Dennis Gartman and other anti-free market Keynesian/communists who make up the ruling elite immediately became bullish on the dollar and declared the precious metals and commodity bull market to be over. What a joke! I am amazed at how Wall Street naively believes what the head of our Fed says. Like pawns on a chessboard they are thrown about and used to serve the ruling elite. As we have been noting repeatedly, the Fed is an instrument of inflation, not price stability. The excuse for its creation was price stability and a reduction of the wide swings in the business cycles. In fact exactly the opposite has happened, as witnessed by the more than 97% decline in the purchasing power of the dollar since the Fed was created in 1913 and by the fact that we had the biggest business downturn in history in the 1930s. The Fed has been a huge failure by every measure, at least in terms of its stated objectives.

In terms of the real reason the Fed was created--to make the rich richer--it has been a huge, unqualified success. Through its inflation it has made its Wall Street bankers hugely rich at the expense of the common man--the miner, manufacturer, farmer, inventor, etc. So the Fed wants to inflate and keep doing it because it makes its own stockholders - large global banks--rich. But The Fed has political, economic, and psychological problems on their hand with its continuous inflationary behavior. As von Mises noted, as long as people think the inflation will end one day, the Fed can continue to inflate. That is why Mr. Bernanke started spinning propaganda about the dollar this week. With the Bond markets showing signs of weakness with rising inflation in the U.S., and with the U.S. the biggest debtor nation in history, it is evidence that some real fear has begun to creep into the hearts of these greedy bugger policymakers who pull Mr. Bernanke's puppet strings. What if the rest of the world sells down the dollar and we can't sell any more bonds? The Fed would then have to begin its hyperinflationary process. That clearly has some Fed officials very worried.

On Tuesday, Bernanke began to spin the phony story that he and the Fed really care about inflation and the dollar. The market believed it for a day or two until the European central bank called Ben's bluff. The Europeans, who still remember the hell of hyperinflation, are much more concerned about inflation than we are. They know that increasing the money supply (reducing rates) will ultimately lead to higher and higher prices. So the Europeans anti-inflation fighting polices are much, much more credible than the Fed's. So when Trichet suggested on Thursday that the European bank may raise interest rates next month, the dollar fell like a led balloon, canceling "strong dollar" the spin put out by Bernanke on Tuesday. Because of the horrendous state of America's credit markets (which keep getting worse), Bernanke could only talk about a strong dollar. But the markets have a much higher level of confidence that the Europeans mean business about inflation because they have been more inclined to back their words with action. So, on Friday, the dollar tanked while oil and gold rose dramatically."
 

And then there's this...

From Ed Steer:

Neither gold nor silver showed any signs of life until the Sydney market closed in their afternoon. From there, both metals rose in fits and starts all through London, but then began to tack on some gains once the Comex opened for business. However, the rise in prices did not go unopposed. You can see from looking at the Kitco gold chart; that once in London trading...and three times in New York trading...gold got sold off slightly when it showed any signs of "irrational exuberance" to the upside. Silver was the same.

Although I'm delighted with Friday's action, I'm actually a bit underwhelmed by it. Firstly, in forty-eight hours, oil tacked on about $16...and the dollar was down 1.4 cents. These are monster moves...both of them...and very gold friendly. Despite that, gold did nothing on Thursday. All the gains came on Friday...such as they were. Remember that oil was about $110 and the US$ was a hair under 70 cents when gold was at its peak of $1,040 or so. We barely cracked $900 in gold on Friday...and silver is still down about 25% from its high in mid-March. So you can see why I'm not jumping up and down. But regardless of the monster sell-off in the equity markets, the HUI put in a pretty good performance.

Despite the run-up in price yesterday, there was just decent Comex volume on Friday, not huge volume. As far as Thursday's open interest numbers go, gold o.i. rose 1,543 contracts, and silver added another 882 contracts. Volume was obviously thin on Thursday as well.

We are, once again, well through both the 20- and 50-day moving averages for silver. Gold closed on its 50-day m.a. yesterday and is about $5 above its 20-day m.a. As I mentioned, volume has not been extremely heavy in either metal for the last couple of days. That could change quickly once the tech funds show up on the long side.

As far as the Commitment of Traders goes, the "8 or less" traders (bullion banks) covered some of their shorts in both metals while the tech funds pitched their respective long positions. There wasn't as much of a clean-out as either Ted Butler or myself were expecting. We were expecting at least double what was actually reported...but maybe this is the best the bullion banks could do! Despite the clean-out, the concentrated short position in gold hit another new high record amount.The boyz are now short 84% of the entire Comex gold market. In silver it's 79%. Yet the CFTC and your mining companies do nothing.

And lastly, I see that Dennis Gartman got totally blown out of his gold short positions. Al Korelin, from the Korelin Economics Report, interviewed me about this...and 'all of the above'...in our Friday commentary which is linked here.

I have three stories today, so I'm glad it's the weekend, as I hope you can find the time to read them...if they suit your fancy. The first one is from The Wall Street Journal of all places. This is the second gold story that has come from a senior 'fellow' of the Council on Foreign Relations in the last sixty days. Does it mean anything? Who knows. You can decide. The article is entitled "Contracts as Good as Gold" and is linked here.

Then a day after the above story showed up, this next story appeared in the Asia Times out of Hong Kong. The co-authors of this piece look and sound like they're reasonably well connected too. Any relation to these two articles? Don't know that either...however, gold is front and centre in both. It's worth reading, and is entitled "Time overdue for a world currency" and is linked here.

And lastly comes the following Reuters story filed from Jerusalem. I would suspect that the contents of this story had something to do with what happened in the gold, oil, currency and stock markets on Friday. The article is entitled "Israel to attack Iran unless enrichment stops--minister". The link is here.

You can fool some of the people all of the time, and those are the ones you want to concentrate on. - George W. Bush, Washington, D.C. - March 31, 2001

Today's video will take you back about 40 years. My God...where has the time gone??? Turn up the volume on your speakers and enjoy! The link is here.

I noted in a Bloomberg story that US household wealth fell the most in five years....$1.7 trillion worth in Q1/08. Real estate-related assets dropped by $329 billion, the most since 1952. And even though the Dow was down 411 points (and falling) just before the close, the 'Catch a Falling Knife" brigade made sure that it didn't close on its low. Is everything still fine? Monday's trading should be educational.

Enjoy the rest of your weekend, and I'll see you bright and early Tuesday morning.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.
 

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Adios for now,

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