A Melman Minute By: Leonard Melman   NOTE: In order to complete Mr. Melman's forthcoming book on the essential fundamentals of the developing international financial crisis and its relationship to gold and silver, new "Melman Minutes" will be posted only three times per week, each Monday, Wednesday and Friday. Since the work has been expanded to include potential solutions to the growing list of seemingly insoluble dilemmas, the working title of the book has been revised to 'REVERSING THE WAY IN!"   April 14, 2010 Anyone who watches PGA golf telecasts regularly is undoubtedly familiar with the term "moving day", usually applied to the third day of a four-day tournament.  The term implies that day, most often a Saturday, is the day on which golfers make decisive moves, either upward or downward.  Well, today is becoming a true "moving day" for many widely followed commodities and we will use a series of charts to illustrate the importance of those moves. America's securities markets are in the process of accelerating their upturn and this morning the Standard & Poor's 500 Index rose above the psychologically important 1,200 level.  This is also significant because that index has now recovered more than two-thirds of its losses from the 2007 peak to the early 2009 bottom.  Many technical analysts might regard this as proof that a new major securities bull market is underway. We believe one of the proximate causes of this morning's strong rallies on several fronts is yesterday's announcement of enormous gains in Chinese and Indian auto sales.  Not only does this suggest a growing level of prosperity in those populous countries, but it also implies strong demand across a wide variety of materials and one of the most important is palladium, used primarily in catalytic converters to purify exhaust emissions.  Huge new car production suggests soaring demand for palladium and the price for that white metal is clearly on an accelerating upward track. With Europe showing some renewed stability; growth in North American auto and truck markets; and huge gains showing up in Asia, any lingering pessimism relating to the anticipated price for Crude Oil seems to be evaporating.  Crude has been on the rise during the last two trading sessions and this morning is within $1.00 of breaking out to a new recovery high.  Rising petroleum prices combined with expectation of rising raw materials prices cannot help but stoke inflationary fears and, combined with enormously negative government economic fundamentals, rising inflationary expectations are the last thing the Greenback needs.  As can be seen, the chart of the U.S. Dollar Index (known as DX) has now taken on a 'toppy' appearance and appears headed toward a test of support near 80.  If that breaks down, it would imply growing weakness in the American currency and, therefore, rising prices in all materials priced in American Dollars. One of the benefactors of both Greenback weakness and rising demand for natural resources has been the Canadian Dollar which this morning broke through and above parity with the American currency.  Investors are clearly showing a preference for the C$ above its American counterpart and we believe this also implies growing faith that demand for precious and base metals, coal, forest products, and petroleum - all of which Canada produces in abundance - will continue to rise, To our way of thinking, the picture that emerges from these charts is one of rising expectations for economic growth, but also awareness that there is a cost involved, namely the possibility, perhaps probability, that one of those costs will indeed be increasing visible price inflation.  Accordingly, we are adjusting our suggested investment outlook to include improving growth for base metals, coal and petroleum and an even stronger outlook for precious metals which we believe will benefit both from advancing fundamental demand expectations as well as ongoing currency debasement. (As always, we repeat our caution that no investment decisions should be made without prior consultation with a registered investment professional.) While there are many elections which take place every year in various parts of our globe, one in particular may be setting itself up as a referendum on fiscal sanity.  We are referring to the upcoming United Kingdom general election slated for May 6. There are three political parties involved, but only two - the Labourites and the Conservatives - have set out decisive platforms, and there are many evident contrasts between them.  In fact, the gulf between the two major parties reflects the same kind of gulf which separates Democrats and Republicans in the USA.  On the Labourite side, their platform pays lip service to controlling deficits, but still assures Brits that they would be looked after with an ever-growing array of social/welfare programs, to be partially financed by increasing taxes on the wealthy. The Conservatives, on the other hand, pledge to reduce taxation while at the same time reining in expenditures and diminishing the explosive growth of government. In America, the majority of politicians and observers now admit that either government will have to be cut back severely - or taxes will have to rise substantially and perhaps the most bandied-about type of tax is the institution of a "value-added tax" or VAT.  What was just a hint of a suggestion a few months ago has grown to a full-scale call for its implementation. Strangely enough, the Obama Administration seems to have forgotten its pledge to not increase the tax burden on low-income Americans as a VAT hits hardest at low income people by imposing a huge tax on virtually everything they purchase, a tax that in many cases can be ill-afforded. As of 10:15 AM PDT most markets are continuing their earlier patterns.  Financial markets are higher in both the USA and Canada with the Dow Industrials ahead by about 60 points and Canada's TSX Index rising by a similar amount.  In precious metals markets gold is ahead by about $8, silver by 20 cents and platinum and palladium are both showing particular strength.  Base metals are higher on average with nickel leading the way while mining share indexes are up a somewhat disappointing one percent.  Crude Oil is once again above $86 per barrel and the US Dollar continues to show weakness in currency trading. - - - - - All quotes US$ unless otherwise noted. Next Melman Minute scheduled for Friday, April 16, 2010. ◄  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.