$100 in 2011 and $19.81 Now: Canada Heavy Crude



From Bloomberg.

— Read more at Bloomberg


Jim Rogers: “Everyone Will Suffer.”

Jim Rogers, the commodities investor, argues that the Canadian economy is not as bad as in many Western countries.

However, he believes there is a “major disconnect” between “asset values and economic realities” all over the world. Central banks, desperate for growth, are inducing these distortions by aggressively pumping money into their economies.

This dependence on central bank intervention to propagate what he calls an “artificial boom” guarantees disaster.

So even if Canada’s footing seems strong, the interconnected nature of the world’s economy assures that problems in the US, Asia, and Europe are problems for everyone.

Basically, it’s business-as-usual in the maturing business cycle.

He still looks favorably on agriculture. I can corroborate what he says about farming. Part of my family owns a big farm in Alberta.

In general, farming is a horrible business and no one wants to get involved in it. As more people, particularly in Asia, rise from grinding poverty and increase their demand for food, supply will be significantly constrained.

From Libya to Uganda! The battle for Africa’s resources.

The resource rush is on for Africa. China was ahead of the American Empire in Libya, and look what happened there (even though Obama was buddies with him two years ago).  China’s commercial deals with Libya are toast. The next imperialist target in Africa is clearly Uganda. Pepe Escobar writes:


That brings us to Uganda as a new land of opportunity. Ah, the sheer scale of humanitarian warmongering possibilities. For a semblance of success, the initial steps of Obama’s African surge would have to include a military base with a long runway attached, and a mini-Guantanamo to imprison the “terrorists”. If that sounds too good to be true, that’s because it is; think of the Pentagon’s Africom headquarters soon entertaining the possibility of time-traveling from Stuttgart, Germany, to somewhere in Uganda.
Any student of realpolitik knows the US doesn’t do “humanitarian” interventions per se. Africom’s surge parallels the real name of the game; precious minerals – and mining. Uganda – and nearby eastern Congo – happens to hold fabulous quantities of, among others, diamonds, gold, platinum, copper, cobalt, tin, phosphates, tantalite, magnetite, uranium, iron ore, gypsum, beryllium, bismuth, chromium, lead, lithium, niobium and nickel. Many among these are ultra-precious rare earth – of which China exercises a virtual monopoly.

The mineral rush in Africa is already one of the great resource wars of the 21st century. China is ahead, followed by companies from India, Australia, South Africa and Russia (which, for instance, has set up a fresh gold refinery in Kampala). The West is lagging behind. The name of the game for the US and the Europeans is to pull no punches to undermine China’s myriad commercial deals all across Africa.

Then there’s the inescapable Pipelineistan angle. Uganda may hold “several billion barrels of oil”, according to Heritage Oil’s Paul Atherton, part of a recent, largest-ever on-shore oil discovery in sub-Saharan Africa. That implies the construction of a $1.5 billion, 1,200 kilometer long pipeline to Kampala and the coast of Kenya. Then there’s another pipeline from “liberated” South Sudan. Washington wants to make sure that all this oil will be exclusively available for the US and Europe.


When you are watching gold prices, remember this chart.

A little while back Casey Research provided this chart:

Why do you care?

Maybe you don’t, because you don’t own gold and you think it’s a barbarous relic like that Roubini, so you would never want to buy it.

But if you aren’t like Roubini (and most other people), you should care.

Basically, this chart shows that during the last two years of gold fever in the 70s, there were seven corrections that averaged 10%. You have to remember that at this time, gold interest was really intense. At present, gold interest is still very low.

The important point is that although we are in a significant bull market for gold, volatility is not abnormal. I wouldn’t necessarily be alarmed if gold fell 15-20% — in fact, such a situation would present a great buying opportunity.

This doesn’t mean you should sit and wait for such a correction — it might not happen to that extent. The biggest correction we’ve seen in 2011 was 6.2% in January. Instead, the main point of this chart is that while we are in troubling economic times, there will be moments where weaker players are nervous and eager to sell their gold. Just don’t sell yours.

Oil down, stocks down, gold up!

The TSX got hammered pretty hard last week, and given how oil is trading right now I think we can expect another rough day when trading begins on Monday morning. The most amusing thing about the big sell-off on Thursday was how gold corrected by about 0.5% only and there were various “experts” on CNBC and Bloomberg talking how this was some kind of notable event and gold was set to reverse.

These people have been wrong on gold from the beginning. You should not listen to anyone like this, because they are not paying any attention. They seem to ignore that central banks are buying gold like crazy. South Korea’s central bank bought gold for the first time in 13 years.  Russia, Mexico, Thailand… their central banks want gold. Chinese and Indian people with their rising incomes want gold.

Here is a one-year chart on the gold price.



When it was $1000 an ounce, people said it was a bubble. In 2010, it just wasn’t the right time to buy gold (what the hell, Mr Ferguson?).  It’s a “barbarous relic,” they say (is Nouriel Roubini an idiot or what?), or “it doesn’t do anything,” say others (Buffet is an amazing investor who completely fails at economics). Even people who were generally favorable to the concept of investing in gold timidly said, “Well, it’s gone up so much, it’s too expensive right now, maybe I’ll buy it on the dips, neuhrg...” All of this was completely wrong. And it is still completely wrong.

When something rises so quickly, one would normally be wise to be skeptical. Yet gold’s price in the modern era does not represent a “normal” situation. Currency crisis is coming. Europe is basically going straight to the ninth circle of economic hell. The ECB has pledged to buy all the bad debt in Europe. QE3 through 13 is coming from the Fed. You can count on it.

This is all positive for gold. What is bad for gold’s price? Deflation — but we don’t face deflation, at least not until the final phase of the crisis, when the Federal Reserve and other central banks finally say, “No.” We still have a ways to go, I promise. This is Bernanke and like folk we’re talking about, after all.

Instead, what we face now is systematic, global currency depreciation. That will ensure gold will continue to rise for a long time to come. Buy yours now — start with a single coin or two. Work your way up to $10,000 in coins by the end of 2011. I strongly anticipate gold to reach $2000 by year’s end, and even then it will have a lot of assured upside.

BP’s Statistical Review of World Energy: highlights

BP has put out its latest Statistical Review of World Energy, and it is a pretty good read. Here are a few highlights:

  • Even with an economy half the size of the US, China has surpassed America has the largest consumer of energy, at 20.3% of the world’s share.
    • 2010 saw the largest increase in the world’s consumption of primary energy since 1973, at 5.6%. OECD countries’ consumption grew 3.5%. Non-OECD countries’ consumption grew 7.5% (63% above 2000 levels).
    • China’s energy consumption increased 11.2%.
    • World proved oil reserves for 2010’s numbers would be sufficient to meet 46.2 years of consumption.
    And here are the best charts from the report:

    Reserves-to-production ratios:

    Crude oil prices in real terms:

    World trade movements of crude:

    Basically, we can be assured that oil is going to go a lot higher, barring a deflation, another financial crisis, and the ensuing collapse of commodity prices. And such a collapse could only be temporary, as trend is unmistakable. We need cold fusion or something at this point.

    Gold and silver versus paper promises.

    Head on over to this site and take a look at the tables presented. The data speaks for itself.

    What will happen to commodities in 2011?

    First, consider the following:

    Commodities are up across the board, in some cases quite dramatically. This boom is international — manufacturers are bidding up prices and there are strains on available supplies.

    Yet consumer prices are not rising significantly. Canada currently has a higher official inflation rate than the US, but not much more. Commodity prices have been bid up in anticipation of rising consumer demand, a prediction which is not panning out.

    Remember the insight of Austrian economics — consumers set final prices, not producers. Consumer spending is weak. Unemployment remains high. Without a surge in consumer spending, these prices are unsustainable. If there is a recession in Asia, and I think there will be (probably next year), then these prices are likely to tank.

    Western banks are stockpiling excess reserves. If this money does not get lent out, unemployment will remain high and consumer spending will continue to suffer. There are no signs that bankers will suddenly become optimistic. China is slowing down. Same with South Korea and Japan.

    What about gold? Gold follows a different set of rules. Central banks buy and sell gold. It is a hedge against the currency crises and mass inflation, rather than recession, where currency appreciates. China is encouraging its citizens to buy gold. When Austrian business cycle theory bites back at China’s bubble, there may be less drive to build shopping malls where no one buys or sells anything, but people will still yearn to preserve their savings with the precious metal as their government devalues money like its going out of style.

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