http://dailyreckoning.com/Writers/Butler/Articles/021306.html

http://www.everbank.com/main.asp?idpage=pro_mscd&affid=eb&referID=11639

http://business.bostonherald.com/businessNews/view.bg?articleid=125629&format=&page=1

*** And a note from James Boric, reporting from India...

"As an investor, it's easy to get caught up in the excitement here in Bombay. After all, the Sensex (India's main stock exchange) hit 10,000 for the first time ever last week, its GDP is expected to grow more than 8% this year and if you walk down Dalal Street the businessmen are dressed in expensive European suits.

"Everyone seems to love investing right now.

"I read an article today in a local Indian newspaper that said young professionals are putting a majority (if not all) of their savings into the stock market. Last night we met a business mogul who told stories of his factory workers huddling around the only computer in his plant so they could check on their stock quotes. But the kicker is, most of those people can't even spell their names. They are simply able to recognize a ticker symbol and a price.

"Can spell a B-U-B-B-L-E?

"While I believe India will continue to emerge as a major world power in the years to come, I would not be a buyer of most equities right now. A correction is on the way - it's only a matter of when, not if. And as everyone here in India knows, those corrections tend to be swift, large and painful.

"Still, even with the threat of a correction looming in the air, there is one area of the Indian market that really interests me - construction.

"All around Delhi, Agra, Bangalore and Mumbai there are thousands of people building walls, sidewalks, curbs and apartment complexes. There are literally stacks and stacks of bricks lining most major streets. There is bamboo scaffolding set up on every other block. And hundreds of workers are constantly mixing the concrete on the edge of the roads to keep up with the construction crews.

"The Cement Manufacturers Association here in India reported today that cement output shot up 14.25% this past January compared to last year. And the real growth hasn't even begun. India still hasn't gotten its act together when it comes to deciding how to move forward with its infrastructure problems - namely, that it has none.

"Yesterday, the Economic Times reported, 'While performing sectors like telecom and ports have managed to grow, laggards like power and roads have slowed further. When it comes to putting promised institutions in place, there has been some movement. But projects simply haven't got off the ground...The ambitious SPV to finance infrastructure projects - India Infrastructure Finance Company - floated by the finance ministry in the last budget, has received no firm proposals from states so far.'

"Translation: the Indian government has yet to spend anything on infrastructure. And still, there are construction projects everywhere you look. When it finally decides to start spending for concrete, brick, steel and other building materials, there will be a lot of money to be had. And again, it's not a matter of if...only when."

*** We spent some of the weekend learning English. We awoke Sunday morning when we were "knocked up" (awaken) by Edward, who was going out to a skate park with his two Italian friends. Then, we had a "fry up" (an English breakfast) and afterwards set off for church. But first, we had to get the schedule "sussed" (figured out). We had intended to take the tube, but it was raining so hard on Maria's "bonce" (head) that we decided to take a taxi, which was so expensive we felt positively "skint" (broke). When we finally got back we were completely "knackered" (worn out.).

--- Advertisement ---

100% Accuracy... With Average Gains of 100%!

Your Chance to turn $5,000 Into $1 Million With the Hot Streak of the Decade

If you were one of this hotshot analyst’s loyal readers in 2005, you would have had a chance to make money on every single one of his recommendations. And not just small gains, either - the average gain was 100%. Catch this streak while it’s still hot - and learn how quickly you could turn $5,000 into $1 million.

http://www1.youreletters.com/t/336225/4459110/784371/0/

---------------------

The Daily Reckoning PRESENTS: 'In our debt-driven, E-Z money economy, where can smart investors turn?' we posed the question to the one person who always has the answers: The Mighty Mogambo. Read on...

A GOLDEN IMAGINATION

by The Mogambo Guru

The thing that really makes my eyes bug out in disbelief is the bond market, and that people are still buying U.S. Treasury debt. Unbelievably, debt is yielding as low as the Fed funds rate or lower! The funds are lower than the discount rate, which is the rate that the banks themselves have to pay to borrow money from the Fed!

Why are they doing this insane act, especially when they are being told, point-blank, by the Federal Reserve that they intend to keep raising interest rates? The Fed will probably raise the rates at least two more times. Don't these bond-buying morons comprehend that when interest rates rise, bond prices fall? And when bond prices fall, these bondholders are going to lose money? What are they thinking?

None of these bond-buying halfwits work for me, because if anybody dared to come into my office and suggest that I stop embezzling the employee retirement fund and instead, put that money into bonds, the last thing they would hear before I leapt over my desk, grabbed them by the neck and threw them out of the window is the Mogambo Laugh Of Scorn And Derision (MLOSAD) ringing in their presumptuous ears.

The reason why all of this excessive creation of money and credit (monetary inflation) is so bad is because it has to (and always does) lead to price inflation. For example: the price of oil. With that, we seamlessly segue to Doug Casey, of The Casey Energy Speculator, who, considering the price of oil, says, "Few analysts have noted that expensive crude might not be a function of supply and demand, but rather a simple function of inflation. Since the younger Bush took office, the United States has been frantically printing money to stave off recession and keep the bloated American economy from collapsing. With the modern equivalent of printing presses going flat-out, the world supply of money has almost doubled since 2000, from less than $2.5 trillion to just below $4.5 trillion."

I am busy scribbling notes, figuring that this will be on the final exam, so I almost missed the important part. He went on to produce a chart showing that, since 1945, money growth and the price of oil have moved together. Since the central banks of the world are intent on destroying our money by constantly growing the money supply, what does one do? Mr.

Casey suggests, "The only intelligent thing to do is to rig for stormy weather by laying in a portfolio full of high-quality precious metals and energy stocks."

Well, OK then, let's look at gold. From the GoldForecaster.com we learn that Exchange Traded Funds (ETFs) are "Still growing in leaps and bounds.

January saw another 90 tonnes of gold added to the E.T.F.s, with 17 tonnes alone going into them last Friday. Tuesday this week saw another 6 tonnes of buying. All of this is new demand. Place that buying next to the 1.7 tonnes sold in the first three weeks of January and one can see the demand is heavy, sitting on top of the normal demand and supply factors."

Then, they go into a lot of other things, like gold, money, oil, currencies and politics, and you end up with the impression that we are really, really, really in trouble. They finally finish by reminding us that what is happening - and the many more ugly things that will happen - is because some idiot central banker (hint: Alan Greenspan) created all the money necessary to burden everyone with crushing levels of debt, all of which was done to drive prices up. But then, they got so high that now they have to fall. This is insane! It's so insane (audience shouts out "How insane, Mogambo?), that I am shooting an AK-47 assault rifle out the window, expending magazine after magazine, going blam, blam, blam, desperately trying, trying, trying to get people to pay attention to the inflationary/deflationary horror that is looming!

And yet, when the police come roaring up in response, like they should, all they want to talk about is how I should come out with my hands up, like it is me that is dangerous, or something! But before I grudgingly surrender, I always make them promise to arrest Alan Greenspan and charge him with the murder of the dollar and the American economy. They always promise that they will arrest him, but they never do.

The Gold Forecaster newsletter takes a rather more wimpy approach, and merely says, poetically, "Greenspan and the governments of the last 20 years sowed the wind and Mr. Bernanke will have to cope with the whirlwind." If I was writing that, I would change the word 'whirlwind' to "huge tornado that is going to rip you, your house, your family and your entire financial world into tiny, itty-bitty, teensy-weensy pieces, and scatter them for 10 miles around the empty, gaping hole in the ground that is left," which adds that Subtle Mogambo Touch Of Piquancy (SMTOP).

In this same, very enlightening vein, we have Paul Hornig (thanks, Richard P!), writing at The Daily Resource, who has run a few numbers concerning the Exchange Traded Funds that are buying all this gold, and determined, "A year ago the ETF's owned an aggregate of 170 tonnes, which would have ranked them as the 25th largest official holder at that time. As of the end of last week, the ETF's held 414 tonnes of bullion, which ranks them as the world's 13th largest official holder, and puts them within striking distance of Mainland China, currently ranked 10th with a reported 600 tonnes."

And how popular are these Exchange Traded Funds in gold around the world?

I have no idea, but Mr. Hornig jumps up to say that he is not too ignorant, too stupid, or too lazy to find out - which, I figure, is his oh-so-clever way of telling me he is siding with my wife about these very points - and says, "ETF's now trade in the U.S., Australia, South Africa, London, and France. SEBI in India has announced enabling rules that will allow gold ETF's, and there is also a rumor of a Hong Kong listing. Bottom line: These significant increases are taking gold out of the system and will clearly counter further official sector sales."

Quickly grabbing the microphone away from this backstabber, I rhetorically ask, "And what is this 'system' that is having its gold taken out? The supply and demand system! And what happens when demand rises? The price goes up!"

It is not just ETFs that are popular, as alert reader Darin G sent news that "Vanguard Group closed two of its most-popular mutual funds today without any advance warning. The company shuttered Vanguard Explorer, a small-cap growth fund, and Vanguard Precious Metals and Mining. Both had experienced huge cash inflows in January."

They had gigantic cash inflows into gold and precious metals? They had so much money that that they are swamped with all that cash? Wow! Remember what I said about what happens to the price when demand goes up?

"But," I can hear you thinking, "what about supply? If supply increases enough to match demand, then the price won't go up! Did you ever think about that, jerk?"

I am gritting my teeth as I fixate on the particular emphasis you put on the word 'jerk,' and so, I will coldly answer you by throwing in your face the weighty 56-page report by Cheuvreux (the equity brokerage house of the French bank Credit Agricole) entitled "Remonetization of Gold: Start Hoarding," and published in Metals And Mining. The report was written by Paul Mylchreest, who is Cheuvreux's mining sector analyst in London, and he says, "Covert selling (via central bank lending) of gold has artificially depressed the price for about a decade, but Bank for International Settlements' data on gold derivatives suggests its impact is on the wane."

The report, by the way, clearly supports the charges made by the Gold Anti-Trust Action Committee people, who go by the acronym GATA. They have been yelling loud and long about this very thing, for which we owe them a debt of thanks.

So, how much gold have the central banks leased/sold? The report estimates that while the central banks claim that they have 31,000 tonnes, actually "Central banks have 10-15k tonnes of gold less than their officially reported reserves." Wow! Off by about half! The discrepancy is caused by the International Monetary Fund (another loathsome bastion of fascist/socialist/communist idiots who think that they can command the global economy), which issued a rule that lets central banks lease out their gold to speculators (who subsequently sold it), but still show it on the books of the banks as still being in the basement, all safe and sound!

Hahahaha!

Hugo Salinas Price, who is the president of the Asociación Cívica Mexicana Pro Plata, writes, "Today, there is not enough gold offered for sale to satisfy demand for gold at $550 dollars an ounce. Gigantic quantities of paper money and magnetic money all over the world are seeking a safe haven in all sorts of tangible and valuable goods, a place where the purchasing power of this money will be protected against the depreciation of fiat.

"The public and big investors in the Western World are hardly aware of what is going on in the gold market. When a handful of investors with a few billions of dollars in spendable funds take notice - which may happen any day now - then gold will have to rise to prices we can hardly imagine today. The scam of fiat money we have lived in since the 30's will soon be clear for all to see. In terms of fiat money, any number for a price of gold is imaginable."

In case you want to test your imagination, Sprott Asset Management says that they can easily imagine $80,000 per ounce. And now, I am imagining it and having pleasant little daydreams about it, too.

Until next we meet,

The Mogambo Guru

for The Daily Reckoning

Mogambo sez: Any dramatic drop in the price of precious metals and oil is Lady Fate being very, very nice to you, and offering you a chance to load up at bargain prices. Lucky you!

Editor's Note: Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter, and a vocational exercise to heap disrespect on those who desperately deserve it.

The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications. If you're inclined to read more, you'll find the whole Mogambo here:

Tranquilizers and the Fed Fix

http://dailyreckoning.com/Writers/Mogambo/DREssays/MG021306.html

-- Posted Monday, 13 February 2006 | Digg This Article