Boone is Now with Boon, Part V

Points made by Boone Pickens in the above video:

• Boone Pickens going green, very green.
• Wind energy.
• Move Natural Gas from power generation to transportation.
• Reduce foreign oil dependency.
• Plenty of Natural Gas reserve in the US.
• Pickens owns a $10 billion wind farm.
• Annual US foreign oil thirst: $700 billion.
• Would oil go below 100? It could, but will only be temporary. OPEC will support the price. [Pickens is making a very important point here. The media and mainstream economists have been blaming the speculators when prices are higher and calling it a bubble phenomenon; when prices are lower they are claiming demand destruction, saying the bubble has popped, and projecting it to go lower to $85 or $50. Almost NOBODY has ever asked the question of who's controlling the supply. It is not in the interest of the oil producing nations to see oil prices deteriorate. Not many are yet to come to the realisation that OPEC can cut production when demand is showing short-term weakness due to recession and credit crisis going global. We have said it and will say it again: Oil is in a secular bull market and it is not a bubble phenomenon. It's simply a supply and demand phenomenon. Make no mistake: when prices are to go higher again, the media and mainstream economists will call it a bubble and coming up with other "creative" justification again.]
• If Pickens Plan works, oil prices will go down.

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Related posts:

• Boone is Betting Against Boon
• Boone is Now with Boon
• Boone is Now with Boon, Part II
• Boone is Now with Boon, Part III
• Boone is Now with Boon, Part IV
• Crude Oil: The Bears Never Stop Flip-Flopping
• Humble Suggestions, Part IV
• Humble Suggestions, Part V
• $3.2 Billion Loss to Shorting Crude!
• Long CLV08 from 80.43
• Long NGV08 from 6.081

@GC, @JY, $DXY

Anatomy of the US Fed

“I still can’t get over the whole Federal Reserve racket.

Consider the following -- let’s take a situation where the U.S. government needs money. The U.S. doesn’t just issue United States Notes, which, of course it could. These notes would be dollars backed by the full faith and credit of the United States. No, the U.S. doesn’t issue dollars straight out of the U.S. Treasury.

This is what the U.S. does -- it issues Treasury Bonds. The U.S. then sells these bonds to the Fed. The Fed buys the bonds. Wait, how does the Fed pay for the bonds? The Fed simply creates money “out of thin air” (book-keeping entry) with which it buys the bonds. The money that the Fed creates from nowhere then goes to the U.S. The Fed holds the U.S. bonds, and the unbelievable irony is that the U.S. then pays interest on the very bonds that the U.S. itself issued. (With great profit to the private owners of The Fed -- Ed. Note) The mind boggles.

The damnable result is that the Fed effectively controls the U.S. money supply. The Fed is… not even a branch of the U.S. government. The Fed is not mentioned in the Constitution of the United States. No Constitutional amendment was ever created or voted on to accept the Fed. The Constitutionality of the Federal Reserve has never come before the Supreme Court. The Fed is a private bank that keeps the U.S. forever in debt -- or I should say in increasing debt along with ever rising interest payments.

How did the Fed get away with this outrage? A tiny secretive group of bankers sneaked through a bill in 1913 at a time when many in Congress were absent. Those who were there and voted for the bill didn’t realize (as so often happens) what they were voting for (shades of the shameful 2002 vote to hand over to President Bush the power to decide on war with Iraq).”

Richard Russell, “Richards Remarks,”

dowtheoryletters.com, 27 March 2007

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Related posts:

• Bunning: “the Fed is the systemic risk”
• Money, Banking & The Fed
• The Money Masters

Boon vs Jim Cramer, Part II

Points made by Jim Cramer in the above video [1]:

• Price of Gold is "plummeting." [Cramer made his "sell, sell everything Gold" call around the 29th [2], if we are not mistaken. The highest day high he could possibly short around that time was 935.2 (COMEX futures). Price of today's close was 831.5 -- that's a retracement of just over 100. Well done Cramer!]
• Strong dollar is the enermy of Gold. [Like most of the mainstream economists out there, Cramer is selling a USD story.]
• Cramer said we are in a deflationary environment.
• Cramer talked to Agnico-Eagle Mines CEO Sean Boyd.
• Sean Boyd said a 20% correction is normal. Now is the time to get back into the Gold stocks.
• Cramer agreed. [Is funny why Cramer would agree to buy Gold stocks when he said we are in a deflationary environment. Cramer, you are flip-flopping!]
• Cramer called Agnico-Eagle Mines the best Gold stock.
• Cramer: Buy, buy, buy... buy Agnico-Eagle Mines!!! [There we saw Cramer jumping back into the inflation camp advising viewers to have Gold as 10% of their portfolio!]

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References:

1. Time to Rush Back to Gold?
2. Boon vs Jim Cramer

Crude Oil: The Bears Never Stop Flip-Flopping

Just as Crude Oil is traded back down, let me take this opportunity to show you just how many times the bears have been wrong consistently and are nothing better than an ordinary flip-flop:

“Oil prices have soared from $32 a barrel at the beginning of the year to an all-time high of $50 a barrel... in large part, speculation. Fundamentally speaking, oil prices should today be in the high-$20-a-barrel range.”

-- National Review 2004

“Mr Forbes, publisher of Forbes magazine, said the price of oil, which peaked at more than $US70 a barrel on Monday as Hurricane Katrina headed for the US Gulf Coast, was unsustainable, 'sheer bubble speculation.'”

-- Forbes 2005

“Oil prices are likely to return gradually to earth -- which probably means a sustainable $40 a barrel.”

-- Times Online 2006

“After weeks of setting records near $100 per barrel, oil prices retreat. Analysts wonder whether this is the start of a bigger tumble.”

-- BusinessWeek 2007

“The roaring oil boom of the last few months may be on its last legs as economic growth slows hard across the world and a clutch new refineries come into operation, Lehman Brothers has warned in a hard-hitting report.”

-- 2008

“Speculators are largely responsible for driving crude prices to their peaks in recent weeks and the record oil price now looks like a bubble, George Soros has warned.”

-- 2008

What we have is a consistent fingers pointing at the speculators. And when they can't figure out why oil prices are high, they call it a bubble; when prices are low, they said the bubble has popped. We have consistently and repeatedly said that is not the case. Our thesis has consistently be: Crude Oil is in a secular bull market and will have its share of corrections along the way. We are not smart enough to figure out where's the top and bottom, but we believe those who are fingers pointing at the speculators and naming the high oil prices a bubble phenomenon will eventually flip again, just like they did many times before. There's nothing new under the sun -- human behaviour never changes.

We at bhc investment would like to urge our readers to stay focused on the long-term secular trend. If you are easily swayed by the market sentiments, you are no better than the herds who buy highs sell lows. That's not what we wish our readers to be.

Crude Oil vs Gold

I can see that the selling down in commodities got a lot of readers extremely jittered. I will respond to all the critics here once and for all. This will probably be one of my last posts before we make our way to France for our yearly holiday, just like last year when we predicted the present US recession before holidaying in China.

Note #1: We are still within an inflationary recession. The USD has a rally, but is a bear market rally. It is NOT in the interest of the US to have a strong dollar. Paulson's “Strong Dollar” policy is a joke. The US needs to DEBASE its currency to get out of the mess it created.

Note #2: Gold is one of the few positions that we took and can't be bothered to trade the volatility at all. We took our position around 87X, and we didn't trade it at all along its way to 98X weeks ago. Why? Because we knew we will be trading against the central banks cartel if we did and it will mean we will have to keep our eyes on our tick charts all the time. That's not how we wish to spend our time. The secular trend is up, buy it cheap when the herds are panic selling.

Note #3: Crude Oil broke out of its 100 psychological level before making its roaring surge to 14X (see figure above). That roaring surge was what happened after a pullback re-action. The pullback in Gold right now is a similar re-action following the breakout of 850. Once this re-action is completed, Gold will enter its next roaring surge. Panic selling Gold now is like selling Crude Oil at 95 before its roaring surge to 14X.

Note #4: Different analysts will always have different views on things, because (1) they don't know what they are talking about; and (2) they focus on the wrong time frame. The most important time frame for Gold is the multi-year chart (see figure above).

Note #5: Natural Gas and Crude Oil are traded down. We are looking to add to our position in Natural Gas and will publish more details when we think we understand more of it. Once this correction is completed and months down the line, I believe many will ask why didn't they sell their farms to buy these precious energy commodities when they were cheap!

Gold

Despite last Friday's selling, our long position from 872.67 [1] remains unchanged. We are looking to add if prices are to fall below 850 [2].

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References:

1. Long GCV08 from 872.67
2. Boon vs Robert Prechter, Part VI

Related posts:

• Gold Price Manipulation by Central Banks
• Gold Rush 21
• I am not a Gold Bug
• Money, Banking & The Fed
• The Money Masters
• Boon vs Glenn Neely
• Boon vs Glenn Neely, Part II
• Boon vs Robert Prechter
• Boon vs Robert Prechter, Part II
• Boon vs Robert Prechter, Part III
• Boon vs Robert Prechter, Part IV
• Boon vs Robert Prechter, Part V
• Boon vs Robert Prechter, Part VI
• Boon vs Jim Cramer

Tom Brokaw Grilling Hank Paulson

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Related posts:

• Rogers: Fannie & Freddie, Oil, China
• Bunning: “the Fed is the systemic risk”

Yen

Long position from 0.9097 [1] stopped out @ 0.9099 [2] last Friday.

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References:

1. Long JYU08 from 0.9097
2. Crude Oil, Gold, Yen