Omm Nom! Nom! Nom!
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Looks like Mr. Limm and kin are trying to take away our punch bowl.   Not bloody likely, I say.

You see, the Chinese really only have one way to cauterize the inflation wound they are already seeing in their economy — and that’s by removing themselves from their peg to the U.S. dollar.  They can make all the noise in the world about raising reserve requirements and dampening loan growth, but they will will still strain to be heard over the “clack-clack-clack” of the U.S. Mintex 3ooo Printing Robots in the basement of Ben Bernanke’s Transylvania Castle.

I say, if the Chinese refuse to de-peg their currancy and let the Yuan run free, naked and untethered, they ought to just continue to get drunk and buy stocks.    It’s the only rational thing to do when you are allowing your currency to be devalued right along with that of the Great White Ghost across the Pacific.  

And let’s face it, there’s only so much iron ore, coal, copper, lead, zinc, chromium and every other heavy metal for industrial usage left in this globe.   Outside dredging the Hudson River, that is, but even that reclamation project is years away.   The Chinese know all this and realize the only way to keep those prices cheap to them is by miming along to the dollar prop story.  

Again, raising Chinese reserve ratios is not going to do that if Helicopter Ben is easing quantitatively as fast as his machines can print, purchase and store massive haystacks of U.S. cabbage like he is.   We all know (and yes, the Chinese leadership knows) that fast cash to you is just heading right back into the Chinese economy via click-bought and big box consumer goods purchases (oh, and look here, retail sales are strengthening… wonder where those goods are coming from?).  What’s more, that money, once washed up on the shores of the South China Sea has to go right back into the commodity markets as the Chinese continue to build out infrastructure and purchase raw materials inventory.

Here me now and believe me later — The Chinese cannot “whip inflation” by themselves while they are tied to the dollar, and while their growing economy is tied to our consumption.   These are infrastructural realities that are not going to change because the Chinese CB has decided to take a stern line on lending reserves.  So sorry.

My take?  Eat a samich (sic) this morning until at least 11 am to see where the market settles out.    Gold is currently down only about $16 (less than 1.5%) and silver, as usual is taking it harder, down 44 cents (2.8%), with the DXY at a current $80.64.   I continue to believe this is a shakeout, and that the dollar will not continue much higher than here, despite all this “nooze” circulating to keep it propped.  If we break much above $81, however, I will be forced to reassess, and perhaps take a little off some of my riskier metal plays.

Best to you all.

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Update:  I notice in my haste to get out this morning’s post that I neglected to give you a run down on yesterday’s purchases (which were recorded in real time on The PPT, of course, as were today’s).   Yesterday I added to the following positions:

2k Petroleo Brasileiro SA (ADR) [[PBR]] @ $40.60

4k Exeter Resource Corp. [[XRA]] @ $8.46

2k Eldorado Gold Corporation (USA) [[EGO]] @ $12.66

2k Thompson Creek Metals Company, Inc. [[TC]] @ $12.67

10k NGAS Resources, Inc. [[NGAS]] @ $1.62

1K Sociedad Quimica y Minera (ADR) [[SQM]] at $37.06

This morning’s purchases (also “adds”):

2k [[PAAS]] @ $21.75

4k Gold Fields Limited (ADR) [[GFI]] @ $11.75

 

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 [youtube:http://www.youtube.com/watch?v=-ERnT1X9HPw 450 300]

A Song for the Times?
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Well, so much for Helicopter Ben’s New York Times- abetted “tightening” kabuki theater act.

Did you enjoy it?  I hear he’s been studying at the New School.

I dunno, maybe the guys down at Goldman called Bernanke up last night and asked him for some help in getting out of their Euro shorts, since DXY (sorry, no quote yet — see? [[DXY]] ) had run up to about $80.30 today by lunch time, only to tuck tail and (Black?) swan dive right back down to $80 flat just in time for Benjamin’s Jawboning routine at 2:15 pm. 

That particular bit of mummery and prestidigitation must’ve in turn convinced at least one or two bag-holding kaftan merchants from Milwaukee to buy dollars again, because the dollar index got all the way to $80.10 by late afternoon, giving us all that familiar “blah” feeling at the close.

All pretense seems to have dropped away after the stock mavens went home, however, and the dollar is now (as of 12:36 am Eastern) trading back down to yesterday’s low’s at about $79.74, looking at a “next stop” of about $79.50, and then $79 even.     Party on, Garth (and Darth… Vadon, that is).

These incipient moves should be enough to get our rally on in the gold and silver sector, not to mention our other hard currency equivalents including earl, natural gas, and the specialty metals.   I was extremely busy today and I apologize, but my punishment was not being able to add much to the portfolio, although I would’ve loved to finish my Allied Nevada Gold Corp. [[ANV]] accumulation today.   I am quite sure it will be more dear tomorrow.  

I was able to add 60 more June $40 [[GDX]] calls at $5.80.   They were a standing order, and I think I may have been able to get them even cheaper, but beggars, chooser, etc. etc.   I now have total 120 of those $40 June strike calls, and I think I’m done there.  

 The rest of my exposure will remain in liquid equities, and I hope to add to positions tomorrow in the usual suspects, and perhaps some NovaGold Resources Inc. (USA) [[NG]] , New Gold Inc. (USA) [[NGD]] and Northgate Minerals Corporation (USA) [[NXG]] .   I also like Exeter Resource Corp. [[XRA]] ‘s relative strength as of late.  

For silver I may dip my toe in the Chanci selection — [[SVM]] , as I’ve admired their price action recently.  I may also look to grab some additional [[PAAS]] .   If [[CDE]] stalls in the early trade, I may also add to that one.

Platinum is reviving tonight along with its brethren, so don’t forget about [[PTM]] and [[PAL]] . 

On the non-precious side, I may grab some [[ERX]] for a ride similar to that of [[AGQ]] .   I also continue to like Petroleo Brasileiro SA (ADR) [[PBR]] and Occidental Petroleum Corporation [[OXY]] .    I also happen to think SandRidge Energy Inc. [[SD]] is undervalued here, and it is a perennial favourite (sic) of The PPT .

Last, don’t forget Thompson Creek Metals Company, Inc. [[TC]] , Teck Cominco Limited (USA) [[TCK]] and Titanium Metals Corporation [[TIE]] in the specialty metal names, and Sociedad Quimica y Minera (ADR) [[SQM]] , as their lithium is a bargain here as well.    I expect tomorrow will be a good day for we merry shipmates of the U.S.S Jackson.

All aboard!

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