Stock Preacher

Last week Gold and Silver extended the prior weeks rally as the Silver price closed + .17 to US$12.102 and Gold price closed + US$13.20 to US$908.50. The Gold price is technically on on track to challenge the US$920-940 level. Silver faces some resistance at US$12.50. Gold’s US$920-$940 level was last July’s top.

BHP Billiton Ltd. Pc announced that they would cut 6,000 jobs and close the giant Ravensthorpe nickel mine in Australia, writing off US$1.6 B, as the global resources giant battles a collapse in commodity prices. Until now BHP, the world’s largest miner, had set itself apart by maintaining production and just last month said sales volumes were holding up despite a global downturn.

But as it became increasingly apparent there would be no quick fix to the slump in commodity prices, BHP was forced to close mines and cut jobs.”Clearly their balance sheet is in a respectable position. But they are not immune from the commodity price environment that we’re seeing, and earnings are going to suffer,” said Neil Boyd-Clark, managing partner at Fortis Investment Partners.BHP Chief Financial Officer Alex Vanselow warned last week that more mines could be closed given the uncertainty in commodity markets, with the Australian metallurgical coal mines already slated to reduce output by 10-15%.

Jim Rogers, one of the world’s best known investors, said last week that the Great British Pound could fall to near parity with the US$ in coming years given Britain’s increasing debt and lack of economic growth saying that the GBP was “finished” and people should avoid investing in Britain, leading to a retort from Prime Minister Gordon Brown that economic policy would not be influenced by speculators. Sterling weakened against the US$ last wek to near a 23 yr low of US$1.3500. Rogers was a co-founder along George Soros of the Quantum Fund, which made more than US$1B betting against the GBP in early 1990s and now is an independent investor based in Singapore.

U.S. consumer confidence slipped to a record low in January, and governments around the world offered further help to banks and industries battered by the global financial crisis. U.S. industry group Conference Board said its sentiment index fell to 37.7 from a revised 38.6 in December, confounding forecasts for a small uptick after Europe’s biggest economy, Germany, showed a surprise rise in business sentiment.

Japan and Britain widened their efforts to help industries hurt by slowing economies, with the UK offering loan guarantees for automakers, while sources said Russia was preparing more support for banks. Japan enacted a US$53B extra budget and said it would offer a lifeline to the small- and medium-sized companies at the heart of the world’s second-largest economy with a US$16.7B fund to buy stakes. Britain announced it would guarantee up to 2.3B pounds (US$3.25B) of loans to the car industry, much of which is foreign-owned, including Ford Motor Co, Honda Motor Co and Nissan Motor Co..France and Italy are also planning aid while Germany and the United States have already announced plans to support automakers. In Russia, sources told Reuters that the government was set to help top bank Sberbank and other lenders with a second bailout package worth more than $27 billion.

One government source said Russia planned to offer Sberbank a 500B roubles subordinated loan. Last week, US Secretary of the Treasury, Timothy Geithner set to work overhauling a US$700B program to rescue the world’s largest economy from the worst financial crisis since the Great Depression. He is expected to propose new steps to unclog credit markets in the next two weeks. Canada’s budget and stimulus package will include incentives for home renovations and a promise of relief for credit card borrowers as well as tax breaks for middle- and lower-income Canadians, the Globe and Mail newspaper reporter.

There’s no denying the strength of the Chinese economy now. Last week, it was announced that the size of the Chinese economy has now surpassed one of the biggest economies in the world; Germany.
After China’s revised GDP numbers were released, it became official that China has overtaken Germany as the world’s 3rd largest economy.

For 2007, China’s nominal GDP rate registered 13%, while its GDP totaled 25.73T Yuan. On the other hand, Germany’s 2007 GDP was only $$3.32T.

This is another example of how China’s economic growth is outpacing most countries during these tough economic times.

Countries like Germany have taken a huge hit in the current financial and economic environment. In fact, the weakening demand for Germany’s exports (it’s one of the largest exporters in the world) continues to weigh heavily on the German economy, and that’s a trend I expect to continue throughout 2009.

There are only two economies standing in China’s way from becoming the world’s largest economy, they are the USA and Japan. Do not be surprised to see China charge pas Japan in the next three to four years as Japan is burdened with a deep recession due to its aging population and lack of jobs for younger Japanese workers.

Further, expect to see Germany and Japan’s economies remain soft and slugish in the coming months and years.

China’s economic strength and size are solid reasons why investors are continuing to focus on China now.

Investors cannot shake the fear that the US government will seize control of a Big Bank, but experts do not believe that will happen.

The word “Nationalization” puts fear in the hearts of bankers and their equity and debt holders like no other word.

The fear of such an event over the past few weeks has caused a lot of speculation that the US government may have to seize control and management of one or more of the country’s largest financial institutions.

This is the worry that has sent bank stocks into a death spiral, as shares of some of the biggest banks, including Citigroup (C), Bank of America (BAC), and Wells Fargo have been hammered in a big way.
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Every major country in the world is increasing their monetary supply, and all analysts expect inflation and a lot of it. So the US$64,000 Question is this; will there be any currency that comes out of this crisis to be considered the new base currency, like the US$ is now? The Big A is that right now nobody knows because there is no totally obvious currency, and that is why the US$ is sill doing well although it is in a long term down trend. This is happening in part because interest rates in the EU remain higher than in the USA, and higher interest rates attract investment capital, which first has to be converted to the higher interest currency, and that bids up its value vs. the dollar. Europe represents an economy about the size of the USA, so there may be some safety there. One can argue for the Swiss Franc, but you know the Swiss banks have had some problems too. So there is no clear picture emerging yet.

US securities regulators are examining Apple Inc.’s disclosures about CEO Steve Jobs’ health problems, to ensure investors were not misled. The Securities and Exchange Commission’s review does not mean investigators have seen evidence of wrongdoing. Both the SEC and Apple declined to comment on the matter. Jobs has said he had an easily treatable “hormonal imbalance,” but last week came back to say that his problems were “more complex” than originally thought, and he would take a medical leave of absence for six months. In 2004, Jobs was treated for a rare type of pancreatic cancer called an islet-cell, or neuroendocrine, tumor. Such tumors can be benign or malignant, but they usually grow slowly and are far less deadly than most pancreatic tumors.