Take a Walk on the Bright Side

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Good Morning,

Overnight action in gold was on the quiet side after a couple of days of motion sickness-inducing ups and downs. The dollar held fairly steady at just above 72 on the index and near 1.585 versus the euro, but oil slipped another $1.25 to get closer to $133 per barrel. We learned yesterday that some hawks within the Fed wanted to get started with raising interest rates "very soon" in order to stem inflation. This, of course, was prior to the recently arrived Fannie/Freddie/Indy maelstrom.

Geopolitics cooled a bit, as signs that Iran could be open to possible deal-making in the wake of international sanctions taking their toll on the country. The US responded to the new sign language by sending a senior official to Switzerland to hold high-level talks with Iran on Saturday. Gold was confined to a channel of from $954 to $966 but little in the way of buying manifested itself in Asia as the night wore on. Indian buyers remain thigh-pursed as they feel prices are overheated at the moment and could give way to the $925 area as a first buying opportunity zone.

New York trading opened the session with a gain of $3.00 at $962.30 per ounce following the dollar (at 71.95) a bit more than oil and basically on hold until housing starts, initial jobless claims and the Philly Fed survey numbers hit the wires this morning. At least as far as the jobs numbers and housing starts were concerned, the former came in under expectations, while the latter was above consensus. Just enough to get the dollar back above 72 on the index and trim gold's early gains and turn them back into a $1.50 loss. The day is still ahead of us however. Silver lost 3 cents to $18.74 and platinum dropped another $14 to $1886 while palladium fell $1 to $425 per ounce. One small correction to make to yesterday's auto sector comments: "shrinking auto production and of a shift towards small cars with small engine displacements" should read: "shrinking auto sales...etc."

The dollar will remain at the center of attention today - rumours of sovereign wealth funds reducing their greenback holdings is keeping the currency's would-be buyers sidelined, as are on-going financial system difficulties. But, as analysts at RBC opine, trying to trade these wacky summer markets is turning out to be nothing more than a crapshoot for many. Odds are all over the spectrum. We hope you have better luck. Chinese investors certainly cannot boast about any such fortune, as the Shanghai stock market has shown a near-49% loss on the year - this after being the world's top performer last year. Never say never. The country's growth rate has cooled to 10.1% if we can call that a cooling. Or, you could have done equally bad, or worse, had you invested in the world's top 40 mining and oil companies - the group of which has lost over $1.4 trillion (with a T) over the past year.

Speaking of some bad luck, as bad as thing appear to be in the US markets, at least someone is now openly talking about issues and some initial action has been undertaken to address the situation. A reader's comments about the issues we focused on in yesterday's comments prompted us to bring you this quote for a what-if scenario to ponder: "Pakistan investors stormed out of the Karachi Stock Exchange, smashed windows and cursed regulators after the benchmark index fell for a 15th day, the worst losing streak in at least 18 years. ``I have lost my life savings in the last 15 days and no one in the government or regulators came to help us,'' said Imran Inayat, 45, a protester and a former banker who retired early and said he lost 300,000 rupees ($4,175) on the market."

Speaking of good news/bad news and continuing on an optimistic note, we bring you today's focus story from Minyanville's Kevin Depew. Just some things to think about...

"Chaos and fear never sleep. This morning the first news story I read was a piece from the Los Angeles Daily News about police threatening to beat down and arrest any "disorderlies" trying to get their money out of a failed IndyMac bank branch in Pasadena, CA. Apparently, after being turned away Monday, customers began lining up at 1:30 a.m. the next morning to take out any cash they had in excess of the $100,000 maximum insured by the FDIC. The scene was reportedly emotional and tense. At another IndyMac branch in Encino, the police were called in after line jumpers threatened to turn an ordinary bank run into a full-on riot.

Yes, it's here. Welcome to the Depression. No, don't drop whatever it is you're doing. Don't get up. It's not going anywhere. It will wait. It's just going to sit over here in the corner and read a magazine while you do whatever it is you need to do.

A Depression doesn't run hot and fierce like some crazed meth burner. A Depression is methodical, purposeful, patient. It will build a shelter out of tree branches and newspaper, light a small, well-contained campfire and wait you out, brother. While you feed on the empty calories of denial and popcorn, it will quietly gather shards of broken dreams and fashion them into a terrible weapon of blunt force reality.

It's a hell of a thing to call this day and age the next Depression. It's dangerous tinfoil hat territory inhabited mostly by screeching lunatics and volatile nutjobs. But by the time they get squeezed out by reputable folks the whole gig will be up, the circus will have left town.

But how can this be? To understand the mechanics of this, the nature of it, let's look back at the last Great Depression

Despite the seeming enormity of it in retrospect, the stock market crash of 1929 barely even registered for most Americans. The day before the crash, Time Magazine's Oct. 28, 1929 issue was business as usual; national stories, Washington stories, a review of the newest plays opening in Manhattan, a piece on a cat washing contest in Kingston, NC.