April 12, 2012
By Kevin Michael Grace
Gold was up (at press time) $44.90 (+2.8%) for the week to $1,676.60, and silver was up $0.68 (+2.1%) to $32.36. Fox Business attributed the gains to “Bill Dudley, the president of the New York Fed, signal[ing] that he is most likely in favour of providing additional [quantitative] easing as he gave a negative read on the economy.”
According to Dudley, “It is still too soon to conclude that we are out of the woods, as underlined by the March labour market release. To begin with, the economic data looked brighter at this point in 2010 and again in 2011, only to fade later in those years.”
Dudley explains why this column persists in putting inverted commas around the word recovery. As he noted, there was a false dawn two years ago and again last year. Meanwhile, governments continue to create oceans of liquidity and debt levels continue to soar, even as the US unemployment rate falls only because millions of Americans continue to give up on the idea of ever finding work.
And too much liquidity is never enough. Europe has already blown through one trillion Euros, even as Spain and Italy slouch toward disaster, and the Continental banking system comes ever closer to insolvency.
Last week, this column warned against making too much of the Ben Bernanke’s supposed kibosh of further quantitative easing, as his thoughts on the matter were, at that time, already three weeks old (and have now been supplanted by Dudley’s). But fools rush in where angels fear to tread, and Dennis Gartman has declared—Dun! Dun! Dun! —the end of the bull market in gold.
Gartman has written off gold so many times it is difficult to count. Back in December, when gold was at $1,565, Peter Grandich commented, “Gartman is one of three people who many in the media continue to quote despite a nearly decade-long poor overall track record on gold. He, Jeff Christian and Jon Nadler [Grandich's "Three Stooges"] have demonstrated to me (and I suspect many others) that a broken clock’s percentage of telling the correct time in any given day is about the same as their actual accurate forecasts for gold in the last decade.”
Eden Tully is another expert all too eager to predict long-term trends based on quotidian (ie, three-week delayed) data. He told Forbes, “[Bernanke's March 13] minutes painted a rather more optimistic view on growth, a more convincing take on the basis for the decline in the unemployment rate and most worryingly of all for gold, an acknowledgement by the Fed of the potential for a change in the end-2014 forward guidance.”
At Seeking Alpha, Gary Tanashian asks, “Why the haste to make such a call, good sir? And you Forbes; why pile on now when everyone from Buffett to Bernanke himself is mowing down the poor, underarmed goldbugs? If gold is so marginalized, why the big and seemingly coordinated negative ad campaign?”
Fear, perhaps? As Ambrose Evans-Pritchard notes, “Whether or not the global economy has really put the nightmare of 2008-2009 behind it and embarked on a durable cycle of growth is of course the elemental question.”
The argument from authority—the “recovery” is real because we’re the experts, and we say so—cannot bind the markets, especially since authority has left the building. President Obama delivered a speech Tuesday interpreted by the Right as an attack on capitalism. It was actually evidence of a mind at the end of its tether.
“I believe the free market is the greatest force for economic progress in human history,” Obama said. “But here’s the thing. I also agree with our first Republican President—a guy from my home state, a guy with a beard, named Abraham Lincoln. [Oh boo, groan, hiss.] And what Lincoln said was that through our government, we should do together what we cannot do as well for ourselves. That’s the definition of a smart government.”
After this praise of the president whose version of subsidiarity was one-half of the country destroying the other half at the cost of one million lives, Obama touted America’s bloated military and public schools, its labyrinthine highway system and its unsustainable Medicare, Medicaid, Social Security and unemployment insurance programs. These “investments,” he claimed, “haven’t been made as some grand scheme to redistribute wealth from one group to another.” But this is precisely what they are, redistribution of income.
Obama accused the Republicans of arguing that “If we would just convert these investments that we’re making through our government in education and research and healthcare—if we just turned those into tax cuts, especially for the wealthy, then somehow the economy is going to grow stronger. That’s the theory. And here’s the news: We tried this for eight years before I took office.” But there have been no cuts in these “investments”; instead, their costs continue to be passed on to future generations.
After posturing as a friend to the ninety-nine-percenters, Goldman Sachs’ best friend Obama accused his enemies of “doubling down on these old broken-down theories.” This is what Freud called the “narcissism of small differences.” Both the Democrats and the Republicans continue to double down on ever-larger government they can’t afford. The Republicans want more money for the military and the transformation of foreign countries; the Democrats want more money for bureaucracies and the transformation of America. Both parties continue to pretend that if they ignore the wolf at the door long enough, he’ll grow bored and slink away. Just as Gartman and Tully pretend that if they ridicule gold long enough, it will turn to lead.
And now to cases. Reuters reports April 9 that CIBC has cut Gabriel Resources’ TSX:GBU price target from $8 to $5.50 (currently $3.13) and April 12 that it has set an initial target for Premier Gold TSX:PG of $7.50 (currently $5.07).
James West of the Midas Letter Opportunity Fund gave BNN his latest picks April 9. He likes Hunter Bay TSXV:HBY and its Sela Creek Suriname gold project because of its “closeology” to other winners on the Guyana Shield Greenstone Belt. He likes Tinka TSXV:TK and its 20-million-ounce Peru Colquipucro silver project, which he sees going as high as “50 million ounces or beyond.” And he likes Asher Resources TSXV:ACN for its management, its tight share structure and because its Nevada King Mine gold project is adjacent to former producers, “yet has never seen modern exploration.”
And at Seeking Alpha, Simit Patel surveys the silver equities. He says that while Pan American TSX:PAA is “very appealing in many ways,” he prefers Silvercorp TSX:SVM, “a negative cost-per-ounce producer… well-positioned to double from here if silver resumes its upward movement,” Silver Wheaton TSX:SLW, “a great candidate for being a part of a precious-metals royalty portfolio…outstanding jurisdictional diversification” and McEwen TSX:MUX, “The reason to invest is [founder Rob] McEwen—a proven company builder in this sector, as the success of Goldcorp TSX:G suggests.”
Finally, the late Trayvon Martin was bumped briefly from the front pages this week by Hilary Rosen. Who she? The PR spiv who attacked Ann Romney, wife of the presumptive Republican Presidential nominee and stay-at-home mother of five, as someone who has “actually never worked a day in her life.” As opposed to, say, bribing politicians with industry money and then reminding them how to vote. Rosen was previously best-known for repositioning the Recording Industry Association of America from obscure to popularly loathed. That was before she managed to reposition the Democrats as the party that hates motherhood. Now that’s public relations.