A Melman Minute By: Leonard Melman   August 22, 2008 Markets continue to change direction with lightning speed, and today is no exception.  Yesterday, we noted that markets had reversed themselves sharply away from the direction of the major corrections which had been taking place over the past several months.  Well, this morning we are witnessing a return to the direction of the major corrections.  It is also interesting to note that several of the important markets we watch are moving in unison and in exactly the directions we might have anticipated.  With crude oil lower this morning, that move stimulated the expectation that inflation might be reduced, and therefore we see the precious and base metals lower and American securities markets higher.  Also, lower inflationary expectations allow the market to assume that dollar creation might be reduced and so we see the U.S. Dollar moving higher. - - - - - In several recent public workshops, we have been presenting a report entitled "Four Dynamic Trends."  In our opinion, the influence of these four important trends will become more critical to the world of precious and base metals and, in general, as they advance, we expect the metals to perform positively - and vice versa. The four trends are: International Terrorism; International petroleum complex problems; Growing vulnerabilities of the USA; Advancing, highly-populous economies of China, India, Russia and Brazil While these trends are long-term in nature and therefore not applicable to any short-term trading strategies, it is interesting to note that as the trends have developed strength in recent years, markets have indeed made significant moves in the anticipated directions.  With the advance of terrorism, prices in various commodities have added a 'risk premium' as concern over international stability and safety has risen  As America has become more vulnerable in terms of its absolute requirements to buy oil from abroad and sell its government debt to foreigners, the U.S. Dollar has embarked on a historic decline, with the U.S. Dollar Index falling from a trading range of about 110-124 just a few years ago to about 71-80 at present.  As important changes have occurred in the international petroleum complex toward a diminishing rate of production growth combined with increasing demand, the price of crude has soared from a previous range of $10.00 - $40.00 - which had contained crude for more than two decades - to a range of $110 - $147 in the present time frame.  And, as the four economies noted above, representing populations in excess of three billion people, have grown rapidly, many important increases have taken place in the demand for a variety of the world's raw material resources.  (all prices US$) It is worth noting that virtually every one of these long-term trends remains in effect and, accordingly, it is our belief that the move toward higher precious and base metals  prices over time will remain in effect. In terms of terrorism, we note that the Taliban has recently begun escalating their efforts and have recently killed numerous persons, both military and civilian.  Organizations such as Al Qaeda continue their attacks, the latest being a car bomb in Algeria which killed 43 victims. The world of petroleum continues to strain as it attempts to satisfy ever-rising demand.  In the latest figures released by international energy organizations, available worldwide daily production and worldwide daily demand and now in almost perfect balance, both in the area of 87 million barrels per day, thereby increasing the market's concern regarding any supply interruptions, be they due to massive storms of nature or incursions into important distribution areas like Russia's actions in the Black Sea area of Georgia. America's vulnerabilities in both petroleum and international finances continue to grow unabated.  She now has to import fourteen million barrels of petroleum every day, just to keep functioning - at the staggering cost of about $1.5 billion EVERY DAY, all of that money going into foreign hands.  At the same time, due to trade and budgetary deficits, she must also market huge increments of US$ debt, much of that also flowing into foreign hands who are now wielding increasing levels of influence over American industrial and political actions. Lastly, despite periodic interruptions, economies of those four nations continue to expand rapidly and, as the number of people whoa re advancing into higher levels of consumer activities grows, the demands for all manner of raw materials grows proportionately, with the resultant growth of inflationary pressures now showing up in many nations' price indexes. So, while sometimes frightening market moves do indeed take place, we believe that the long-term scenarios, which have become dominant since early in this century, will remain important factors over the next several years, and it is our expectation that they will redound to the benefit of both the precious and base metals. - - - - - As of 9:00 AM PDT, the precious metals are still lower with gold trading down $12 at $823 while silver is off about 54 cents to the $13.40 area and platinum is down $40 to $1,409.  Base metals have also retreated this morning with copper down by about 3.5 cents, nickel is off 18 cents and both lead and zinc are each down more than one penny.  However, all four of them remain significantly above the lows set several days ago.  Crude is off more than $3 to near $117.75 and the U.S. Dollar Index is back up to the 76.7 level, ahead about 50 points on the day.  Financial markets are split, with the Dow up about 148 while the TSX is down over 80 points.  ◄  Previous Minute                                                                                                          Next Minute  ►
		DISCLAIMER The information presented above is based on data which we believe to be from reliable sources, but the accuracy of which cannot be guaranteed.  Any opinions or predictions contained herein are those of the editor and are likewise offered also for information purposes only. Any investment decisions should be made only following consultation with registered investment professionals.