The VRTrader.com VR Silver Newsletter - Monday 6/26/2006
"Tools for the High Performance Trader"
Copyright ©2006, All rights reserved.
LEIBOVIT FILES | by Mark Leibovit
Monday, June 26, 2006
Opening Comments
Economic Data/Events June 26-30, 2006:
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MONDAY, June 26:
New Home Sales for May (10 am ET)
Treasury auctions 3 & 6-month bills
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TUESDAY, June 27:
Consumer Confidence Index for June (10 am ET)
Existing Home Sales for May (10 am ET)
Weekly Chain Store Sales (8:55 am ET)
Treasury auctions 2-year notes
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WEDNESDAY, June 28:
EIA Petroleum Status Report (10:30 am ET)
Treasury auctions 5-year notes
2-day FOMC Meeting Begins
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THURSDAY, June 29:
GDP for 1st Qtr (8:30 am ET)
Corporate Profits for 1st Qtr (8:30 am ET)
Weekly Initial Jobless Claims (8:30 am ET)
Help Wanted Index for May (10 am ET)
FOMC Meeting - policy statement (2:30 pm ET)
Weekly Money Supply (4:30 pm ET)
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FRIDAY, June 30:
Personal Income & Spending for May (8:30 am ET)
U. of Michigan Consumer Sentiment for June (9:45 am ET
Chicago PMI for June (10 am ET)
It will be an interesting and sad week for the free-enterprise system as the FederalReserve Open Market Committee meets and will very likely again raise interest rates. Itwill be sad for many other reasons one of which is the very fact the Federal Reserve evenexists to begin with. We've touched on this what appears to be an 'off the wall' comment,but, in truth, the free market which dictates interest rate direction anyway should be theguiding light not a group of self proclaimed monetary intellectuals who have alreadyproven their ineptness through many market cycles. We're going to pass on the contents ofthe Federal Reserve classic expose, 'The Creature From Jekyll Island, written by G. EdwardGriffin' which essentially points to the fraud and deception and, most importantly,unaccountability! We all know that Greenspan himself was the direct cause of the 1987stock market crash and his sucessor, Bernanke, appears to be on the same likely path. Bothof them come from the same school, the University of New City Taxi Cab Drivers, whosemotto is 'Slam on the Brakes' or 'Slam on the Accelerator'. In other words, cause damageto the economic system and then later try and fix it! The day will come, but likely wewon't see it in our lifetimes, but the Federal Reserve will not be here to stay and we'renot alone in this view. The problem now is that we have a Fed Chairman who is running amukand the consequences could be very onerous for all of us, unless we're short the markets.In that regard, we are short and plan to stay short to try and capitalize on the downsidewhich is inevitable. We just hope and pray it is not a repeat of 1987. Not that we won'tmake money in such an environment. We will. But, our concern is for the undue financialsuffering most investors will have to endure in a repeat of this kind of event -one thatcould easily be avoided. Remember, intellect and money do not necessarily go together. Inother words, some of the dumbest people either have money or manage money. The clasVRSilver Newsletter - 626200.ems sic example is the failure of Long-Term Capital and thesubsequent Fed bailout - the blind leading the blind!
The stock market is current quite oversold and there are enough gullible traders andmoney managers who might try and pick a bottom here to the extent of an end of the month'window dressing' and/or Fourth of July rally to the extent we could get caught on theshort side. We will, of course, be watching the numbers carefully and know where to placestops. Our take, as you know, is that the environment is getting progressively more andmore negative and the technical bounce experienced last week was more than sufficient toset up another wave to the downside. Seasonality between now and the end of October is notfavorable which we all know, so either you're in cash or short in our view! The bottomline: We're going to break 10,000 in the Dow Industrials.
Last week was interesting week in a couple of our favorite market sectors, Gold andREITS. REITs, though a bit weak are trading at higher lows despite last week's continuedweakness in the bond market (i.e., new highs in interest rates). Sought of a positivedivergence, but let's see if it holds.
Gold was rallying late last week despite a new recovery high in the Dollar Indextrading in tandem to the upside versus inversely which we're all taught is the textbookrule. Gold shares have also be acting well. Now, we don't know if this technical bouncehas legs, but we're trying to give it the benefit of the doubt as there are stilltechnical bounce numbers, e.g., $610 in the bullion and beyond that with potential to thestratosphere! We know the Dollar is in a 'dead-cat bounce'. Sooner preferably than later,the Fed will have to stop raising rates or risk recession then, foreigners will have oneless reason to buy dollars and the dollar's fall will resume.
Since reaching a 26-year peak of $725/oz. on May 9th, gold has corrected 20 percent, butremains up 10 percent 2006 year to date. Silver slipped 31 percent from it's $15/oz. peak,but remains up 15 percent year to date.
Why are we buying gold? There are several reasons. The debasement of the U.S. dollar andof all currencies which are fiat, just paper with the printing presses running twenty-fourhours a day. The long-term history of gold as a store of value is another. Can youquestion a 5000 year old history! We know the ancients saw 'health benefits' in wearinggold now confirmed in early scientific findings. Other reasons include too much governmentspending. Inflation is not stopping anytime soon and neither are international tensions.Our supposed friend, China, is not a friend at all except to shoppers at Walmart! If youthink for a minute that North Korea acts independently without guidance from Red China,think again. On the other hand, China is building its country and economic (as well asmilitary position) by its seemingly insaitable demand for commodities. This is indirectlya big plus for precious metals and gold! And, let's not forget about Iran who is no hurryto respond to the Western effort to dissuade it from enriching uranium. Don't be surprisedif there is indeed a massive airstrike against Iran in the not too distant future. In ourview, Israel should have struck long before now, much as it did against Iraq nearly 20years ago! They really have no choice. Either destroy your enemy now before they canattack or be forced to retaliate when they do!
The bottom line is that we're long-term holders of gold, but we cannot assure you THELOW is in place. If the Fed continues to push interest rates higher (whether the Dollartrades inversely with gold or not), investors may decide that winning the war againstinflation is the most important detriment to gold's continued appreciation and begin tosell. In that event, gold could remain under pressure for quite some time and new buyingshould be put on hold until the dust settles and a new clear uptrend is re-established.
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Suggestions? Comments? on the newsletter service. We would like to hear from each andeveryone of our subscribers. Our email is mark@vrsurvey.com.
DISCLAIMER
This newsletter is a publication dedicated to the education of stock traders. Thenewsletter is an information service only. The information provided herein is not to beconstrued as an offer to buy or sell securities of any kind. The newsletter picks are notto be considered a recommendation of any stock but an information resource to aid theinvestor in making an informed decision regarding trading in stocks. It is possible atthis or some subsequent date, the editors and staff of VRTrader.com may own, buy or sellsecurities presented. All investors should consult a qualified professional before tradingin any security. The information provided has been obtained from sources deemed reliablebut is not guaranteed as to accuracy or completeness. VRTrader.com staff makes everyeffort to provide timely information to its subscribers but cannot guarantee specificdelivery times due to factors beyond our control.
