A Melman Minute By: Leonard Melman MELMAN MINUTE - September 7, 2010 - - - - - Unfortunately, our 'mantra' this morning must be a version of "so much news, so little time" as we must catch a morning ferry to Vancouver to take care of business.  However, we will do our best to summarize current events and use tomorrow morning's MM to bring our reports up to date. First, and of considerable importance, despite lagging visible inflation, despite talk of actual deflation, despite strength in the US Dollar during the past several months and despite slow economic growth, the price of gold is once again rallying strongly.  The monthly futures contract for October (most current month) has just crossed above the $1,260 mark this morning and, as can be seen from the chart, is now within a 'hair's breath' of breaking into new record territory. While there is no single reason being cited for gold's strong performance this AM, most commentators offer the suggestion that this bullish run is based more on concerns over the world's general economic health than any one particular factor.  In any case, we believe the intermediate rally from the late-2008 bottom just below $700 per ounce remains intact, as does the encouraging pattern of 'rising bottoms' along the way. Most Canadians seem to have developed the viewpoint that economic troubles may indeed be affecting economies in many other nations, but their own domestic economy is immune from such consideration due to the immense storehouse of natural resources located in this beautiful land.  Perhaps they should reconsider that stance as a series of news releases over the weekend appears to point to growing trouble ahead. First, major banks are now pulling in their lending horns, given the reality that there is a shortage of quality companies who (a) desire to borrow money or (b) qualify for major loans.  According to an article in Monday's Globe & Mail newspaper, "The head of Canada's largest bank says the sputtering economic rebound has dealt the industry a tricky dilemma:  how to boost lending when solid borrowers are increasingly hard to find." (Our emphasis) The article also addresses our other key point by noting, "Demand for credit, particularly from corporate clients, has dried up amid a stubborn economic recovery that refuses to take hold." Banking is not the only industry feeling early tremors as real estate sales figures have quickly moved to the downside this summer.  Home sales figures for August show declines of 36% in Vancouver and 22% in Toronto when compared to last August's numbers.  Inventories of unsold homes have also risen and price declines are starting to take hold. Information on the Canadian jobs front was also discouraging as the same newspaper also carried an article on that subject, quoting Krishen Rangasamy, economist at CIBC World Markets, as follows:  We're not very optimistic about the labor market given the economic slowdown under way...It looks sluggish."  Among his predictions for the coming year are a jobless rate stuck in the 8.0 to 8.5% range and zero non-government job growth reports for August. Canada's problems are compounded by another consideration, this one longer-term, but nevertheless important.  One of our readers was kind enough to send us information (unverified by TMR) that compared to 1996, there are now 250,000 fewer children under 15 in Canada while, also compared to the same year, there are now approximately 1.3 million more citizens 75 or older.  This raises the important question of how a diminishing number of new entrants into the job market are supposed to finance the requirements of growing numbers of retirees. Our interpretation of these items and other similar information in many parts of the world is this:  if economies continue to flounder, many governments, despite talk of 'austerity', will continue to promote new projects, new borrowing, new Quantitative Easing" and new currency creation.  We believe a flood of such events will be long-term bullish for gold and silver. Perhaps that is one reason they are continuing along their rising paths.  In line with the above, we cannot help but note that President Obama just announced a brand new $50 billion infrastructure rebuilding program designed to create jobs.  Not one word was mentioned about how America was supposed to pay for such largesse. Speaking of such dismal thoughts, the U.S. National Debt continues to expand - one might say 'explode' - at an astonishing rate.  At the end of last week, that number reached $13.4 trillion - a full $1.6 trillion above the year-earlier figure - and that rate of growth shows no signs of abating. As of 7:00 PDT this morning, financial markets in North America have opened to the downside with the Dow Industrials off by more than 80 points while Canada's TSX is lower by a moderate 22 points.  Precious metals are holding most of their gains with gold currently near $1,257 and silver just under the $20.00 per ounce mark.  Base metals are trading lower on fears of slow economic growth and mining share indexes are close to unchanged with strong precious metals performances offset by weaker base metals.  Crude oil is down by about $1.00 per barrel; the US Dollar Index is ahead by nearly 40 points; and long term interest rates are headed to the downside so far today. - - - - - All quotes US$ unless otherwise noted. Next "Melman Minute" scheduled for tomorrow morning, September 8, 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.