A Melman Minute By: Leonard Melman   NOTE:  In order to complete Mr. Melman's forthcoming book on the essential fundamentals of gold and silver, new "Melman Minutes" will be posted only three times per week, each Monday, Wednesday and Friday until about mid-January 2009.  The working title of the book will be 'Eight Pillars of Gold." September 04, 2008 NOTE:  My apologies for the lateness of this morning's MM, but it was necessary to complete work on an important project with a very hard deadline.. However, the time was hardly wasted as the markets were making truly dramatic moves during the first four hours of trading.  Most importantly, the Dow Industrials is down almost 300 points during the first 3.5 hours of this session and has now just broken through clear support in the 11,300 area, with the average now standing close to 11,270 at 10:00 AM PDT.  In Toronto, the TSX Average is also down a similar amount and has just broken below the 13,000 level as selling waves are driving that average downward for the third consecutive day. Unfortunately, falling mining share quotes are playing a large role in the TSX Index decline.  In fact, during yesterday's trading on the TSX, almost 100 TSX companies were trading at new low prices for the past 52 weeks and the vast majority of those were resource development corporations.  Included in that list of new yearly lows were such mining giants as Barrick Gold, Hudson Bay Minerals and Lundin Mining.  When major players in a group are all hitting new lows simultaneously, investors should surely sit up and take notice.  So far this morning, selling continues unabated with the major mining share indexes continuing their declines. In the case of the general markets, they appear to be reacting to continuing bad economic news releases and today's digest was particularly negative.  Included in this morning's data was a report that new unemployment claims in the USA rose by 15,000 in the past week; preliminary estimates of tomorrow's jobs report indicate further job losses during August and a rise in the unemployment rate to 5.8%; and a report from General Motors' finance arm, GMAC, stated that they were laying off an additional 5,000 workers as the company scales back their mortgage lending operations. These reports followed on the heels of information that auto sales in North America continued to plunge.  Ford Motor Corporation was particularly hard hit with their USA sales numbers down a full 25.6% in August and General Motors sales were off by 20%.  These dismal figures came in the face of increasingly vigorous promotion and price discount efforts.  In Canada, sales were down by an average of 17% for the Detroit-headquartered auto giants.  In the case of Canada, Chrysler showed the steepest decline in August with sales falling by 24.6%. We also note that Canada is showing another important sign that all is not well and we are referring to the Canadian housing markets.  In Victoria, once one of the most reliable and fastest-growing real estate markets in the Dominion, the change from wildly optimistic to serious concern has been dramatic indeed.  During the past four months, the average price of a single-family home has declined from C$630,000 to slightly under C$550,000!  In addition, the number of sales is falling rapidly and the inventory of unsold homes is rising with equal rapidity.  While the real estate professionals in British Columbia's capital city assure the public that the figures only reflect a situation where, "...it causes things to soften a bit..." as Tony Joe, President of the Victoria Real Estate Board was just quoted in the Victoria Times-Colonist, it seems to our skeptical eyes that the Canadian real estate market is beginning to follow a similar pattern to that of the USA just eighteen months ago - and we know what has ensued in that nation! Victoria is hardly alone.  As new unsold residential listings grew to record or near-record proportions in Ontario, Quebec and Manitoba, talk of continually rising Canadian real estate prices is heard less and less. The great danger, of course, is that as real estate markets enter periods of rising uncertainty, cautious consumers will pull in their purchasing horns and that will negatively impact a number of consumer-dependent industries, particularly including the retail trade. (insert chart #1:   www.bigcharts.com    LEH    one year) One matter of great concern to market optimists has to be the utter failure of many important stocks to put on sustained rallies as news of one government stimulative measure after another is announced.  Please note on the chart of major brokerage house Lehman Brothers that each rally has been short-lived and the chart remains perilously close to its lowest levels of the year. (insert chart #2:   www.bigcharts.com    AIG    one year) The situation with insurance giant AIG is almost identical.  Despite everything that has been done to instill confidence in America's economic future, AIG continues to trade near its lowest levels in many years - and many other brokerage houses, insurance companies and major banks charts have a similar appearance. Apparently, the world's investment communities are not yet convinced that all the stimulative packages will resolve the growing host of economic troubles now clearly apparent.  In fact, some would suggest those efforts will only make the problems worse in the long run. However, it is short term numbers which have our attention this morning and they have a definite negative bias.  As mentioned, financial markets in Canada and the USA are down sharply, however the precious metals are not rallying in the face of those declines, but rather are mostly unchanged.  The U.S. Dollar continues to strengthen and oil is off once again, with crude down over one dollar to about US$107.  After solid openings, base metals are moderately lower on balance, while mining share indexes, as noted, continue to decline.     ◄  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.