25.1.07

Precious Metals
It looks like the bullion banks as agents of the Central Banks are fighting hard to keep the Gold price close to or hopefully for them below USD 64o.-- and Silver below USD 13 the oz. However there is enormous physical demand which helps the prices to go up step by step. I believe that from February on we will move considerably higher and will at least see prices above the 1980 high in Gold (USD 850.--) and a price above USD 20 for Silver. If you check Kitco from time to time, please have a look at the charts. Interesting is that practically always every day around 12.00pm NY time there is much pressure on the prices. That is the time the bullion banks sell heavily futures to control prices or to bring prices down.
I believe it is the right moment to be long gold and silver

Oil
I think we have seen the lowest prices for this down move. There is no fundamental reason why oil should be lower. We are clearly at Peak Oil. Several major oil producers are not able to maintain their production (Norway down more than 10%, Mexico so far down 6% in the biggest oil field, Cantarel which is the 2nd biggest world wide, North Sea is down and so on). Only Saudi Arabia did increase their production considerably. However I truly believe that the produce more in order to help to destabilize I. , another important oil producer, which is actually rather a trouble maker in the region. As I.'s income is 85% dependent on oil, lower oil prices put their president under pressure and might help to draw attention away on supporting the groups in the country north of I. (at least this low price policy helped at the end of the 80ies to bring down the previous Russian government). I believe that complacency is clearly to high. At any time can a conflict in the region escalate. Any conflict will lift oil prices to at least USD 100/barrel. Anyway it seems that I. could only survive relatively well another 12 months in case the oil prices will stay low. so at the latest in 12 months we will see higher prices (although I believe we will see it much earlier). By the way I strongly believe that Saudi Arabia is post peak as well. Already 2 years ago they had water cuts of above 40%, once reaching 50% the production will fall fast as the pressure to pump the oil cannot be maintained. Anyway pumping salt water into the fields is not helping to increase quality. Please take note that S.A. is spending millions for drilling. If they really have as much reserves as they claim, why spend this enormous amounts to find new reserves?
If you have already a position in Oil and Gas, keep to it. If you have not position yet or a small position, start to build up. The risk is the S.A. produces for another few months more than the market needs and prices could go down a bit more. However after that I see higher prices
To read about Peak oil, read Richard Heinberg "Power Down" or "The Party's over"

Uranium
U308 prices have gone up nicely over the last few months. It is more and more difficult to find new resources. Stockpiles are very low. I do expect prices still to go up more maybe towards USD 90

USD
Long term trend is still clearly down in my opinion. However it would not surprise me to see a stronger USD for a few months
I prefer to be long CHF or my favorite currencies Gold and Silver

Commodities
Softs. Medium to long term I see softs much higher. As I believe in the Peak Oil Theory and the food production depends very much on cheap oil which will not be available anymore in the future, food production cost will go up and that has to be passed to the consumer at some point. Interesting to see that Mexico did freeze the Tortilla prices as Corn has gone up too much. The masses of Mexican would not be able to pay much higher Corn prices. Be prepared to see much higher food prices over the next few years

Environment
The draught in Australia shows us clearly what is in for us in the future. Taking into account that climate is changing and that soil quality is decreasing we might very well have to face more such situation as in Australia. Having followed the Environment information and having just finished the book "Collapse" from Jared Diamond, I must say that I am not surprised

Inflation
Real Inflation is much higher than the numbers we get delivered. Hedonic calculations, Seasonally adjusted numbers, right of substitution and so on allow to show much nicer numbers than the reality. Please check the below information I found on an essay on Kitco
Quote
According to John Williams at ShadowStats.com, the official numbers are bad enough, in that "Seasonally-adjusted PPI rose 0.9% for the month, following a 2.0% gain in November. Annual PPI inflation rose to 1.1% in December from 0.9% in November. The seasonally-adjusted December CPI gained 0.55% (0.15% unadjusted) after being reported as unchanged in November. Unadjusted, year-to-year December CPI was up 2.54% versus 1.97% in November. The annual average inflation rate for 2006 was 3.23%, slightly lower than the 3.39% in 2004, which was the highest annual inflation rate since 1991
Unquote
There are not many investments that have shown returns above the Inflation rate

Liquidity
Seems that Central banks did not stop creating more liquidity. More and more money chasing the same amount of goods. That means all investments can go up. However I do expect real stuff, like gold and so on, go up a lot more than funny things

Stocks
It would not surprise me to see a correction soon. However I do expect higher prices until the end of due to the liquidity as mentioned before. Anyway as mentioned I prefer the real stuff. If stock, I prefer the unhedged gold and silver miners (HUI), Oil and Gas stocks, U Miners and so on

my musings

24.1.07
Dear reader from time to time I will post my musings/opinions about markets. The postings will not be on a regular basis. Please check from time to time