It may be time to go grab our red capes from the closet and dust them off. In the pen is an increasingly agitated bull, snorting and pawing at the dirt. He's been held back by a combination of natural and man made forces. He ain't happy.
Gold has had every reason to correct sharply. It appears that we are in the early stages of another deflation scare. The money supply is shrinking at unprecedented rates and the economy is going into free fall. These are NOT the best pre-conditions for a rally. But they are GREAT conditions to fool everyone, and that is how great moves get set in motion.
When any asset or stock ignores what is unequivocally bad news, it virtually always suggests that the information has already been factored into the market. I believe that's going on now.
The rally in Gold to near its all time highs has occurred very quietly and without much notice. So has the recent strength in Silver. The underlying mining stocks appear to be forming healthy base patterns which are ideal for a resumption of the strong advance that still has a very long way to go.
The key obstacle to an advance here is the tremendous liquidity in Gold. When the really nasty part of the upcoming market meltdown asserts itself, it will inevitably trigger margin calls among the hedge fund community. They may be FORCED to sell the most liquid assets they have, and Gold would be at the top of that list.
The key levels to watch for an upside move are $1,250 on Gold and 500 on the HUI. If these are both exceeded, the technical picture goes from neutral, where it sits now, to very bullish. Given the very small overall market capitalization of the mining sector, even a small re-allocation of investors' portfolios will lead to huge gains. Remember how those internet stocks were propelled by the combination of small market floats coupled with surging demand? You ain't seen nothin' yet!
But, I would highly urge that one does wait for the key levels cited above to be penetrated before diving in. This is a very tricky market which is actively being intervened in. A false breakout CANNOT BE RULED OUT!
To play this market in the event of the now growing more likely upside breakout, you can't go wrong with physical GOLD. But, the real profits will be made in junior precious metals mining stocks. We will update our analyses of which stocks are the most appealing at the appropriate time.
I would, however AVOID the various Gold ETFs, most notably GLD. These are built on derivatives and there is very credible information floating around that there is not enough bullion to honor scheduled deliveries. Thus far, this shortage has been met by the issuance of more paper, but the supply of GOLD is falling rapidly from existing mines. Imagine the move if future delivery obligations can not be met.
I can see the bull's breath steam in the cold air. Toro, Toro, Toro!
Marko's Take
Monday, August 30, 2010
Friday, August 27, 2010
Economic "Intel"-igence.
Remember about 6 weeks ago, how Intel (INTC) reported blowout earnings, ushering in a great earnings season and convincing investors that the so-called "recovery" was finally gaining steam? Well, just moments ago, INTC warned on the revenue line. Not good.
The company says it now expects revenue for the quarter of $10.8 billion to $11.2 billion. That compares with a previous forecast of $11.2 billion to $12 billion. Not good.
This is why data points like earnings are so irrelevant when it comes to assessing either the market or the economy. They're backwards looking and of absolutely NO use.
The Gross Domestic Product (GDP) estimate for the 2nd quarter was also revised much lower. Originally, economists had it pegged at 3.5%. Then, it came in a 2.4%. Today, it was reported at 1.6%. Not good. But, "better than expectations". Whose? Not mine!
A common notion is that looking at prior earnings and economic data is like driving a car while looking in the rear-view mirror. No wonder investors, even sophisticated ones, have so much trouble making money.
The market, with 4 Hindenburg Omens under its belt, and maybe a 5th today, has, in its infinite wisdom, anticipated the economic slowdown. The reason markets are able to anticipate with such deadly accuracy is that investor liquidity and preference for risk is reflected in stock prices. When investors are liquid or are interested in taking on risk, stocks go up. Simultaneously, the same factors are filtering their way through the economy.
That's how the market mechanism works. Investors express themselves both through economic actions and how they allocate resources. However, these do not react simultaneously. Markets are more sensitive. One can think of the market as the proverbial "canary in the coal mine". The canary's health indicates the economy's health. Not that mysterious, now, is it?
Of course, not every market move is significant. Markets can go up or down for a variety of reasons, including interest rates or the Dollar or problems with sovereign debt. But, significant market moves, especially when they're at odds with our economic expectations, should NEVER be ignored.
This is how "Intel"-igence works. As you understand the market's unique language, investing becomes much, much more straightforward.
Marko's Take
The company says it now expects revenue for the quarter of $10.8 billion to $11.2 billion. That compares with a previous forecast of $11.2 billion to $12 billion. Not good.
This is why data points like earnings are so irrelevant when it comes to assessing either the market or the economy. They're backwards looking and of absolutely NO use.
The Gross Domestic Product (GDP) estimate for the 2nd quarter was also revised much lower. Originally, economists had it pegged at 3.5%. Then, it came in a 2.4%. Today, it was reported at 1.6%. Not good. But, "better than expectations". Whose? Not mine!
A common notion is that looking at prior earnings and economic data is like driving a car while looking in the rear-view mirror. No wonder investors, even sophisticated ones, have so much trouble making money.
The market, with 4 Hindenburg Omens under its belt, and maybe a 5th today, has, in its infinite wisdom, anticipated the economic slowdown. The reason markets are able to anticipate with such deadly accuracy is that investor liquidity and preference for risk is reflected in stock prices. When investors are liquid or are interested in taking on risk, stocks go up. Simultaneously, the same factors are filtering their way through the economy.
That's how the market mechanism works. Investors express themselves both through economic actions and how they allocate resources. However, these do not react simultaneously. Markets are more sensitive. One can think of the market as the proverbial "canary in the coal mine". The canary's health indicates the economy's health. Not that mysterious, now, is it?
Of course, not every market move is significant. Markets can go up or down for a variety of reasons, including interest rates or the Dollar or problems with sovereign debt. But, significant market moves, especially when they're at odds with our economic expectations, should NEVER be ignored.
This is how "Intel"-igence works. As you understand the market's unique language, investing becomes much, much more straightforward.
Marko's Take
Thursday, August 26, 2010
How We'll Know If Hindenburg Omen Is Wrong
Yesterday, a 4th dirigible was seen flying the not-so-friendly skies. According to Robert McHugh, who seems to be THE expert in the now famous Hindenburg Omen, we need 5 to get a "cluster". But, let's take a deep breath, reduce our hyperventilation, and examine what signs we might look for that would suggest that this entire exercise is nothing but a blip on the radar screen.
One key factor is time. The "crash window" is open, but won't stay open for very long. If the financial markets don't implode pretty soon, then this entire exercise will become, as Dee Dee Myers used to say, "non-operational". Ms Myers, who had the tremendous misfortune of explaining away Mr. Clinton's ongoing non-truths, had to constantly change stories as new facts came to light. But, we can discuss that at another time.
If the Dow Jones Industrial Average (INDU) remains near or above 10,000 through the end of September, at the LATEST, I'd say that it would be time to go back to the lab.
Key downside levels to watch would be roughly 9,500 on the INDU, 1,025 on the Standard & Poor's 500 (SPX) and 2,100 on the Nasdaq Composite (IXIC). A break above 10,500 on the INDU, 1,100 on the SPX or 2,300 on the IXIC would suggest that the markets are probably poised to rally more.
As far as Gold goes, a break above $1,250 would suggest that an upside explosion could be at hand. Contrarily, a penetration below $1,200 would be bearish, short-term, and probably be followed by a sharp, albeit temporary, correction.
Other signs that this whole scenario is incorrect would include rising long-term interest rates or a falling Dollar. In the instance of a deflationary scare, we should see a strong dollar and strong bond market. The key industry group to watch is the financial stocks. They are currently poised to be leaders on the downside. The markets CANNOT rally without at least a some upside strength in this group.
Do we care about earnings or economic statistics? NO! They are backwards looking and have ZERO predictive value. In fact, any decline is likely to take place against a backdrop of at least decent news. Like a sleight-of-hand magician, markets are very expert at having investors look up when investors should be looking down. Look at my pretty assistant!
It's important to note, that as of this writing, not ONE of these possible contra-indicators is in place. In fact, there is only one piece of evidence that the scenario is not imminent. The yield curve is steep and positively sloped, meaning that the difference between long-term rates and short-term rates is high. The reason this is important is that a steep yield curve creates a very profitable lending environment for banks and other financial institutions which borrow short or cheap and lend long or dear. Since banks aren't lending, this may not be all that signficant.
The slope of the yield curve determines how profitable the financial sector will be prospectively. And, as noted above, the health of this sector is important to the direction of markets and the entire global financial system. It also has very high predictive value in assessing the prospects for economic growth.
Another sign of strength would be felt in the commodities markets outside of the precious metals, which are acting as currency right now. Keep an eye on oil, food and key industrial metals such as Copper. Dr. Copper, as it's known, is a better economist than most Nobel Laureates. Doc Copper has "Marko's Take" in his waiting room. As of today, all the commodities are either weak and weakening or looking very toppy.
So, keep on an eye on the checklist that might suggest that the dark clouds are nothing more than a short thunderstorm. The forecast is for torrential rains, but predicting the market is not much more of a precise science than the weather. Even if it doesn't rain, don't forget your umbrella.
Therefore, unless the conditions for a re-assessment are met, as described above, investors should continue to hold lots of cash, use inverse ETFs for hedging and profits, and wait out the storm.
Marko's Take
One key factor is time. The "crash window" is open, but won't stay open for very long. If the financial markets don't implode pretty soon, then this entire exercise will become, as Dee Dee Myers used to say, "non-operational". Ms Myers, who had the tremendous misfortune of explaining away Mr. Clinton's ongoing non-truths, had to constantly change stories as new facts came to light. But, we can discuss that at another time.
If the Dow Jones Industrial Average (INDU) remains near or above 10,000 through the end of September, at the LATEST, I'd say that it would be time to go back to the lab.
Key downside levels to watch would be roughly 9,500 on the INDU, 1,025 on the Standard & Poor's 500 (SPX) and 2,100 on the Nasdaq Composite (IXIC). A break above 10,500 on the INDU, 1,100 on the SPX or 2,300 on the IXIC would suggest that the markets are probably poised to rally more.
As far as Gold goes, a break above $1,250 would suggest that an upside explosion could be at hand. Contrarily, a penetration below $1,200 would be bearish, short-term, and probably be followed by a sharp, albeit temporary, correction.
Other signs that this whole scenario is incorrect would include rising long-term interest rates or a falling Dollar. In the instance of a deflationary scare, we should see a strong dollar and strong bond market. The key industry group to watch is the financial stocks. They are currently poised to be leaders on the downside. The markets CANNOT rally without at least a some upside strength in this group.
Do we care about earnings or economic statistics? NO! They are backwards looking and have ZERO predictive value. In fact, any decline is likely to take place against a backdrop of at least decent news. Like a sleight-of-hand magician, markets are very expert at having investors look up when investors should be looking down. Look at my pretty assistant!
It's important to note, that as of this writing, not ONE of these possible contra-indicators is in place. In fact, there is only one piece of evidence that the scenario is not imminent. The yield curve is steep and positively sloped, meaning that the difference between long-term rates and short-term rates is high. The reason this is important is that a steep yield curve creates a very profitable lending environment for banks and other financial institutions which borrow short or cheap and lend long or dear. Since banks aren't lending, this may not be all that signficant.
The slope of the yield curve determines how profitable the financial sector will be prospectively. And, as noted above, the health of this sector is important to the direction of markets and the entire global financial system. It also has very high predictive value in assessing the prospects for economic growth.
Another sign of strength would be felt in the commodities markets outside of the precious metals, which are acting as currency right now. Keep an eye on oil, food and key industrial metals such as Copper. Dr. Copper, as it's known, is a better economist than most Nobel Laureates. Doc Copper has "Marko's Take" in his waiting room. As of today, all the commodities are either weak and weakening or looking very toppy.
So, keep on an eye on the checklist that might suggest that the dark clouds are nothing more than a short thunderstorm. The forecast is for torrential rains, but predicting the market is not much more of a precise science than the weather. Even if it doesn't rain, don't forget your umbrella.
Therefore, unless the conditions for a re-assessment are met, as described above, investors should continue to hold lots of cash, use inverse ETFs for hedging and profits, and wait out the storm.
Marko's Take
Tuesday, August 24, 2010
I See The Bad Moon Arisin'
Last night was a full moon. A BAD moon. With the recent solar eclipse window still open, coupled with the full moon, the anticipated crash, should it happen, ought to take place imminently. A review of the significance of astro-harmonics can be reviewed by clicking here: http://markostake.blogspot.com/2010/07/hindenburg-omen-confirmed-or-was-it.html.
Now that earnings season has encouraged investors, it's time for the economic reality to splash cold water in the financial markets' faces. The news is exceptionally poor.
The Richmond branch of the Federal Reserve’s measure of manufacturing activity for the mid-Atlantic region plunged by about 30% . The fall was less than economists were predicting, but the decline strongly suggests tha one of the US’s only area of strength has an empty gas tank.
The economy’s weakest sector, housing, got yet more bad news. Sales of existing homes fell 27.2% in July, the steepest monthly drop in 15 years and past consensus expectations of a 12% decline.
The Richmond Fed’s index came in at 11, versus 16 the previous month. Last week, the Philadelphia branch registered a disappointing index of factory activity that sent markets reeling, as it suggests a potential dip in the August reading of the broader Institute of Supply Management’s index. The Chicago Fed’s index is due next week.
And this is just the beginning. In today's trading, it appears that we will have yet another Hindenburg Omen. This makes at least 3, depending on whose definition of it one ascribes to. What's a few New Highs and New Lows among friends, anyway?
The equally ominous head and shoulders pattern gives us at least an idea of what might be reasonable to expect here in terms of the next intermediate low. A good rule of thumb is that once the neckline is broken, the downside target is equal to the decline that immediately preceeded it.
Thus, one could look to these levels for the market to take its next breather: 525 on the Russell 2000, 925 on the Standard & Poors 500, 1900 on the Nasdaq Composite and 8500 on the Dow Jones Industrial Average. And, these levels, or some approximation thereof, should be reached BEFORE the actual crash occurs, if there is one.
The only safe places to hide capital are Utilities, Oil Companies with a high dividend, Gold (physical), the Dollar and ultra-safe Bonds. For the aggressive, inverse ETFs such as FAZ and TWM ought to provide at least a good hedge, but also a very risky, but potentially very profitable trade.
I see the Bad Moon Arisin', I see trouble on the way....
Marko's Take
Now that earnings season has encouraged investors, it's time for the economic reality to splash cold water in the financial markets' faces. The news is exceptionally poor.
The Richmond branch of the Federal Reserve’s measure of manufacturing activity for the mid-Atlantic region plunged by about 30% . The fall was less than economists were predicting, but the decline strongly suggests tha one of the US’s only area of strength has an empty gas tank.
The economy’s weakest sector, housing, got yet more bad news. Sales of existing homes fell 27.2% in July, the steepest monthly drop in 15 years and past consensus expectations of a 12% decline.
The Richmond Fed’s index came in at 11, versus 16 the previous month. Last week, the Philadelphia branch registered a disappointing index of factory activity that sent markets reeling, as it suggests a potential dip in the August reading of the broader Institute of Supply Management’s index. The Chicago Fed’s index is due next week.
And this is just the beginning. In today's trading, it appears that we will have yet another Hindenburg Omen. This makes at least 3, depending on whose definition of it one ascribes to. What's a few New Highs and New Lows among friends, anyway?
The equally ominous head and shoulders pattern gives us at least an idea of what might be reasonable to expect here in terms of the next intermediate low. A good rule of thumb is that once the neckline is broken, the downside target is equal to the decline that immediately preceeded it.
Thus, one could look to these levels for the market to take its next breather: 525 on the Russell 2000, 925 on the Standard & Poors 500, 1900 on the Nasdaq Composite and 8500 on the Dow Jones Industrial Average. And, these levels, or some approximation thereof, should be reached BEFORE the actual crash occurs, if there is one.
The only safe places to hide capital are Utilities, Oil Companies with a high dividend, Gold (physical), the Dollar and ultra-safe Bonds. For the aggressive, inverse ETFs such as FAZ and TWM ought to provide at least a good hedge, but also a very risky, but potentially very profitable trade.
I see the Bad Moon Arisin', I see trouble on the way....
Marko's Take
Friday, August 20, 2010
Fasten Your Seat Belts
The entire financial and business world has now learned the two most important words: Hindenburg Omen (HO). We have written about this indicator extensively, with trading floors, chat rooms and even the mainstream press doing articles. Until now, the confirmation of the indicator has been in dispute. That will now change.
In today's trading, which is also a triple witching day, the confirmation is now a done deal. Ironically, this is quite possibly the last time this indicator will be useful or viable. However, if you choose to ignore it, well then be prepared to take a major hit to your financial fortunes.
Prominent wall street analysts such as Joseph Battapaglia, have derided this indicator. Of course, Mr. Battapaglia is well know for beating the internet drum all the way to the top and then to the bottom of the crash in technology stocks. With all due respect Joe, haven't you learned your lesson?
Mr. Battapaglia is hardly alone in his disgust. In fact, the major brokerage houses rarely, if ever issue sell recommendations. Abby Joseph Cohen, a perma-bull if there ever was one, never met a stock or market she didn't like. Never has thought that any financial asset was overvalued. Dear Abby, perhaps you should write an advice column? Naw, it's been done. Never mind!
Now that the HO has made the Wall Street Journal, CNBC, The Drudge Report, Huffington Post and Wikipedia, it will become too well known to be useful ever again. That's how technical analysis works. The minute everyone knows is the very moment that no one can benefit.
For investors, the key here is survival. Safety can be found in very few places: Gold, the Greenback, high quality bonds, high quality utilities and oil companies. But, it would be far more prudent to let this impending waterfall decline fully express itself. There ought to FAR better entry points.
In the case of Gold, for example, consider the likelihood that the mega hedge funds are probably being hit with margin calls and will need to sell the only liquid assets they have. Thus, it is imperative that position sizes be kept fairly small, temporarily.
In addition, most people are long a variety of financial assets such as real estate and employment. These, too, will affected. If you're so inclined, a strategy of hedging your balance sheet is advisable. My personal preference is to place some portion of your portfolio in inverse ETFs such as FAZ and TWM. But, be aware that these are NOT for the feint of heart and will subject you to wild swings and increasing volatility.
Investors need to consider the emotional impact of watching their net asset values bounce around like a pinball machine. No point in subjecting yourself to what is sure to be a tremendous amount of angst.
Marko's Take
In today's trading, which is also a triple witching day, the confirmation is now a done deal. Ironically, this is quite possibly the last time this indicator will be useful or viable. However, if you choose to ignore it, well then be prepared to take a major hit to your financial fortunes.
Prominent wall street analysts such as Joseph Battapaglia, have derided this indicator. Of course, Mr. Battapaglia is well know for beating the internet drum all the way to the top and then to the bottom of the crash in technology stocks. With all due respect Joe, haven't you learned your lesson?
Mr. Battapaglia is hardly alone in his disgust. In fact, the major brokerage houses rarely, if ever issue sell recommendations. Abby Joseph Cohen, a perma-bull if there ever was one, never met a stock or market she didn't like. Never has thought that any financial asset was overvalued. Dear Abby, perhaps you should write an advice column? Naw, it's been done. Never mind!
Now that the HO has made the Wall Street Journal, CNBC, The Drudge Report, Huffington Post and Wikipedia, it will become too well known to be useful ever again. That's how technical analysis works. The minute everyone knows is the very moment that no one can benefit.
For investors, the key here is survival. Safety can be found in very few places: Gold, the Greenback, high quality bonds, high quality utilities and oil companies. But, it would be far more prudent to let this impending waterfall decline fully express itself. There ought to FAR better entry points.
In the case of Gold, for example, consider the likelihood that the mega hedge funds are probably being hit with margin calls and will need to sell the only liquid assets they have. Thus, it is imperative that position sizes be kept fairly small, temporarily.
In addition, most people are long a variety of financial assets such as real estate and employment. These, too, will affected. If you're so inclined, a strategy of hedging your balance sheet is advisable. My personal preference is to place some portion of your portfolio in inverse ETFs such as FAZ and TWM. But, be aware that these are NOT for the feint of heart and will subject you to wild swings and increasing volatility.
Investors need to consider the emotional impact of watching their net asset values bounce around like a pinball machine. No point in subjecting yourself to what is sure to be a tremendous amount of angst.
Marko's Take
Thursday, August 19, 2010
The Great Bond Bubble?
Pimco's Bill Gross, no stranger to the bond market, has opined that there is a bubble indeed. And, for good reason. Treasury yields are at generational lows. And, the bull market in bonds has lasted for about a decade. So, how much lower could bond yields possibly go?
Bonds carry two types of risk. One is the risk of default. Two, is what is known as "duration" risk, or the impact on principal from changes in prevailing interest rates. Duration is the more significant since, given the very low rate structure, any rise in rates will result in capital losses which will not be offset by the yield.
The longer the maturity, the greater the duration. For example, if one holds a 30 year maturity, even a 1% rise in rates will produce a double-digit loss.
The default risk is not insignificant, but it is fairly low since the Federal Reserve (FED) can simply print money, if necessary to ensure that maturities are honored.
So, the ingredients of a bubble are certainly present and, in fact, Gross may be correct. However, "Marko's Take" believes that for the intermediate term, bond yields will head lower still.
Bond yields are driven by several factors. Inflation, supply and demand and probability of default are the most critical. Currently, given the now approaching "Second Dip", inflation is not likely to accelerate. In fact, we are more than likely in the early phases of a new DE-flation scare.
If we look to the last two decades in Japan, we can speculate as how low interest rates can go. The "Land Of The Rising Sun" now has become "The Land Of The Falling Yields". Tokyo has been mired in a depression since its own stock market and real estate bubbles popped simultaneously in 1990.
Naturally, at some point, as the national debt is monetized through liberal use of the printing press, we can expect a re-emergence of inflationary pressures. That will happen in the not-so-terribly distant future. When it does, Gross will be correct, but it may not occur for months or years.
Bond investors have nothing but poor choices. If one invests in short-term bonds to avoid the duration risk, the yields are extremely low, especially on an after-tax basis. The 2 year note is at a fat 0.48%. If one reaches for yield by purchasing longer maturities, one faces substantial principal risk. Thus, allocating a good portion of one's portfolio to fixed income is not particularly attractive.
A better choice for fixed return would be higher grade utility stocks. They have generally paid good dividend yields which grow over time. Their risk is low since utilities are regulated monopolies whose product is necessary, unless, of course, you wish to have no light, no heat, no gas and no electricity. A second group of high dividend paying companies are oil stocks. Wanna try living without transportation?
In the current environment, attractive investment opportunities are few and far between. We continue to recommend holding a portion of assets in GOLD while staying liquid in anticipation of a MUCH better buying opportunity.
Marko's Take
Bonds carry two types of risk. One is the risk of default. Two, is what is known as "duration" risk, or the impact on principal from changes in prevailing interest rates. Duration is the more significant since, given the very low rate structure, any rise in rates will result in capital losses which will not be offset by the yield.
The longer the maturity, the greater the duration. For example, if one holds a 30 year maturity, even a 1% rise in rates will produce a double-digit loss.
The default risk is not insignificant, but it is fairly low since the Federal Reserve (FED) can simply print money, if necessary to ensure that maturities are honored.
So, the ingredients of a bubble are certainly present and, in fact, Gross may be correct. However, "Marko's Take" believes that for the intermediate term, bond yields will head lower still.
Bond yields are driven by several factors. Inflation, supply and demand and probability of default are the most critical. Currently, given the now approaching "Second Dip", inflation is not likely to accelerate. In fact, we are more than likely in the early phases of a new DE-flation scare.
If we look to the last two decades in Japan, we can speculate as how low interest rates can go. The "Land Of The Rising Sun" now has become "The Land Of The Falling Yields". Tokyo has been mired in a depression since its own stock market and real estate bubbles popped simultaneously in 1990.
Naturally, at some point, as the national debt is monetized through liberal use of the printing press, we can expect a re-emergence of inflationary pressures. That will happen in the not-so-terribly distant future. When it does, Gross will be correct, but it may not occur for months or years.
Bond investors have nothing but poor choices. If one invests in short-term bonds to avoid the duration risk, the yields are extremely low, especially on an after-tax basis. The 2 year note is at a fat 0.48%. If one reaches for yield by purchasing longer maturities, one faces substantial principal risk. Thus, allocating a good portion of one's portfolio to fixed income is not particularly attractive.
A better choice for fixed return would be higher grade utility stocks. They have generally paid good dividend yields which grow over time. Their risk is low since utilities are regulated monopolies whose product is necessary, unless, of course, you wish to have no light, no heat, no gas and no electricity. A second group of high dividend paying companies are oil stocks. Wanna try living without transportation?
In the current environment, attractive investment opportunities are few and far between. We continue to recommend holding a portion of assets in GOLD while staying liquid in anticipation of a MUCH better buying opportunity.
Marko's Take
Tuesday, August 17, 2010
Showdown In The Middle East?
As if the world and the United States didn't have enough holes in their collective dams to plug, here comes yet another leak. Based on a recent interview with John Bolton, who has served as an interim ambassador to the United Nations from August 2005 to December 2006, action against Tehran must be taken within days, or risk a nuclear enemy in the resource rich Middle East.
Israel has days to launch a military strike against Iran's Bushehr nuclear facility and stop Tehran from acquiring a functioning atomic plant, Bolton said.
Iran is to bring online its first nuclear power reactor, built with Russia's help, on August 21, when a shipment of nuclear fuel will be loaded into the plant's core. Russia, voted for the sanctions, yet has assisted Iran in bringing this facility on line. What does Russia care? They are one of a small group of countries whose oil supplies are growing. No Peak Oil for them.
At that point, Bolton warned, it will be too late for Israel to launch a military strike against the facility because any attack would spread radiation and affect Iranian civilians.
"Once that uranium, once those fuel rods are very close to the reactor, certainly once they're in the reactor, attacking it means a release of radiation, no question about it," Bolton told Fox Business Network.
Absent an Israeli strike, Bolton said, "Iran will achieve something that no other opponent of Israel, no other enemy of the United States in the Middle East really has and that is a functioning nuclear reactor."
The UN Security Council hit Tehran with a fourth set of sanctions on June 9 over its nuclear programme, and the United States and European Union followed up with tougher punitive measures targeting Iran's banking and energy sectors.
Bolton doubts that any military action is forthcoming, however. In fact, despite his warning, he believes the window of action may have already closed.
The significance of this to investors is multi-fold. In the first place, any military action would undoubtedly cause a major disruption in Middle East oil and a closure of the Gulf of Oman shipping lanes. That would have grave consequences on the world economy and the financial markets.
Secondly, the other impact would be a heightened crisis bid in Gold. One can only imagine the resultant spike in the price of Gold. We could see a move of $100 per ounce in minutes or even more.
A deflationary scare might suddenly turn into an inflationary scare.
For the record, one must believe that the odds of such a dramatic occurrence is pretty low. The world is already engaged in numerous military conflicts and resources are quite constrained for more military spending. But, it does alter the investment calculus. One would be well-advised to maintain some positions in assets that benefit from crises. GOLD.
Marko's Take
Israel has days to launch a military strike against Iran's Bushehr nuclear facility and stop Tehran from acquiring a functioning atomic plant, Bolton said.
Iran is to bring online its first nuclear power reactor, built with Russia's help, on August 21, when a shipment of nuclear fuel will be loaded into the plant's core. Russia, voted for the sanctions, yet has assisted Iran in bringing this facility on line. What does Russia care? They are one of a small group of countries whose oil supplies are growing. No Peak Oil for them.
At that point, Bolton warned, it will be too late for Israel to launch a military strike against the facility because any attack would spread radiation and affect Iranian civilians.
"Once that uranium, once those fuel rods are very close to the reactor, certainly once they're in the reactor, attacking it means a release of radiation, no question about it," Bolton told Fox Business Network.
Absent an Israeli strike, Bolton said, "Iran will achieve something that no other opponent of Israel, no other enemy of the United States in the Middle East really has and that is a functioning nuclear reactor."
The UN Security Council hit Tehran with a fourth set of sanctions on June 9 over its nuclear programme, and the United States and European Union followed up with tougher punitive measures targeting Iran's banking and energy sectors.
Bolton doubts that any military action is forthcoming, however. In fact, despite his warning, he believes the window of action may have already closed.
The significance of this to investors is multi-fold. In the first place, any military action would undoubtedly cause a major disruption in Middle East oil and a closure of the Gulf of Oman shipping lanes. That would have grave consequences on the world economy and the financial markets.
Secondly, the other impact would be a heightened crisis bid in Gold. One can only imagine the resultant spike in the price of Gold. We could see a move of $100 per ounce in minutes or even more.
A deflationary scare might suddenly turn into an inflationary scare.
For the record, one must believe that the odds of such a dramatic occurrence is pretty low. The world is already engaged in numerous military conflicts and resources are quite constrained for more military spending. But, it does alter the investment calculus. One would be well-advised to maintain some positions in assets that benefit from crises. GOLD.
Marko's Take
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