Economic strength is what ultimately drives the direction of a currency; something people are beginning to realize now that their fears are subsiding.

This may well impact the price of gold as the cost governments will incur to raise capital may well create inflationary pressures on their respective economies as austerity measures are implemented in the weaker economies. Greece, Ireland, Spain et-al may find that inflation is more of a concern than deflation due to economic austerity.

Follow this link to view the full article

- Ritch

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation (”MRCC”). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

So, what do you see?

In the last 30 days the Euro has come from a low of around 119 up to a current intra day high of 130.

The level of panic that was evident at the start of June with the immanent collapse of the world financial system due to Euro default was deafening. I was inundated with calls from people panicked that a new sell off similar to the one we all bled through in late ’08 early ’09 was about to happen again. For some reason that fear is still running through this market place in spite of almost all of the negative indicators becoming more positive, not more negative.

Follow me:

1. Gold has stabilized at roughly $1200/ounce.
2. Copper has stabilized around $2.95/lb
3. The Euro as you have seen above has recovered $.11 and seems to be quietly (since no one but me seems to talking about it) re-establishing a “normal” level vs the U.S. dollar.
4. The bond markets seem to be able to absorb whatever is being printed whether it is Greek Euro debt or U.S. Treasury debt at much lower returns.

So what is going on?

First of all it seems rather evident to me that if you are still afraid, “quit it”. The markets whether I understand why or not have once again done their job of re-establishing the working relationships that they need to function all on their own. To me the most telling argument is that the Euro dollar has recovered as much as it has. What this tells us is that the U.S. dollar needed to decline to maintain its relative advantage for exports against what appears to be a relatively more competitive Euro zone. I know some people have a hard time either believing this or understanding this, the reality is that a cheap currency is the best tool to stay competitive relative to your trading partners.

So if you had bought U.S. dollars through the purchase of treasury bonds from the Euro zone in Euros’ back when the Euro was trading at say 144 to the U.S. dollar and then sold those treasuries when the Euro dropped to 120 to the U.S. dollar you can now buy 15% more U.S. treasuries than you held then, back if you so desire.

This now has been the currency trade that I tried to convince everyone was going on, when no one wanted to believe me, when I said that is why you buy U.S. treasuries at virtually no return a year ago. It wasn’t then and isn’t now the interest rate that is fuelling the massive movement into the bond markets we saw in the last two years with interest rates at historically low levels, it is still a currency trade. This is why you should also not be afraid of the stock markets.

Money managers in Europe have now been given an opportunity once again to swap some of there strong Euros back into U.S. equities at a very reasonable level. 130 buy’s a lot more IBM than 120. The Dow also now has more than 40% of its profits generated internationally as opposed to less than 10% in the 1980’s for example. In past times we would call this arbitrage now it is simply a currency trade and has the function of helping to stabilize the markets internationally when one area gets out of line with another. So if Proctor and Gamble is not doing so well in the U.S. it can make that up in Asia where it had never really profited before. But then becomes a more attractive buy for an investor in Europe where the currency has appreciated against the dollar.

So everyone please re-read what I wrote 05/25/10 “What Are You Still Waiting For” and take a breath and start to take some action. The world isn’t perfect but it’s not so bad either!!

Talk to you soon

Ritch

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation (”MRCC”). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

The article was written by Tom Fennel and is titled “Beware the Dow-Gold Ratio”

Mr. Fennel parses a piece that was actually written by David Rosenberg who is apparently the chief economist at Gluskin Sheff & Associates.

Basically Mr. Rosenberg postulates that the price of gold will reach $3000/ounce and when that happens theDow will have retreated to 5000 or lower based on his interpretation of the historic ratio of the price of gold when it reaches record levels. From his research that would suggest that the ratio will decline to a 1 for 1 level when gold reaches these record levels based on correlations from the past. For example when gold reached $850 in 1980 the Dow was roughly 800 bringing the ratio to nearly 1 for1. Well that certainly did occur, I was there then also. The reasons were all rational then,

the same as they are now, but it was a very different financial world.

Before we go further, I should say that as any of you who have read what I have written on gold in the recent past, know that I am bullish on gold and do feel it is going to higher levels. At the same time I also believe that the Dow will be higher than it is now. Maybe not 20,000 but I can certainly see 14 or 15,000 in the next two or three years. That would make the ratio maybe 5 or 6 to 1.

So why do I say “Spurious”?

Jimmy Hoffa (yes that Jimmy Hoffa) had the best quote for economists when he was head of the teamsters union and negotiating a labor contract:

“Economist is the only profession where you can be constantly employed while being constantly wrong”

I may be paraphrasing a wee bit but I am sure you get the gist. We are dealing in this article with exactly what Jimmy meant. The premise may not be completely wrong ($3000 gold) but the facts used to reach the conclusion are at best open to interpretation.

Mr. Rosenberg fails to include in his interpretation for example the relative value of each Dow point relative to the value of the equity markets in real terms today versus 1980 for example when the Dow was at 800. He also fails to take into account the total value of all gold ( about one trillion dollars) and the total value of the equity markets world wide. That is a number that I can only imagine but I do know it is many times the total value of gold. Back in 1896 and in 1932 and finally in 1980 when the ratio was at or nearly 1 for 1 the value of the equity markets was a fraction of what it is today. Depending on whose figures you wish to use, every day on our ever shrinking planet somewhere between 8 and 13 trillion dollars worth of money is converted. This also doesn’t take into consideration the value of the bond market that dwarfs the equity markets. The actual value of gold in real terms in today’s sophisticated financial markets constitutes a fraction of what really transpires internationally. Gold is an alternative investment to equities or holding your money in cash (dollars) nothing more. The price of gold is an interesting barometer of sentiment and predicated on the same influences as any other commodity, supply and demand.

Since 1980 the population of our little blue star has reached north of 6 billion people. Something like 2 and a half billion more than when gold reached $850/ounce. It seems to me you could make a very real argument that the current price (roughly$1200) is right in line with the population ratio compared to gold, compared to 1980, the last time gold made a new record high.

The point is to not make simple assumptions based on some historical occurrences and then try and mold those occurrences’ so they fit into our modern model. The differences

Or similarities between what was then and what is now must be viewed in the context of the time that the event occurred. History very much does teach us about the future and helps us not repeat our mistakes (hopefully), but must be interpreted and thoughtfully reviewed. It must not be dealt with in a straight line as Mr. Fennel interprets Mr. Rosenberg’s thesis.

The best that I can say for this article is that if you are a doom and gloomer you would have loved it. If you are a bit more rational you had a good chuckle.

Talk to you soon

Ritch

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

The market has never been a static place. On a short term basis the market is always changing up or down, on a long term basis the market has a definite upward bias.

For the last two years however the market has seen a fairly persistent rally from what were lows of devastating consequence. The previous five months before March of ’08 resulted in a wealth destruction in equities that truly had no precedent. I do not believe at any time in the modern financial system did we have a period were we were literally set back by a decade in the development of personal wealth. The result in Canada was the massive move into all things real estate while, the U.S. saw real estate wealth destruction that had never been seen before, as banks collapsed and record numbers of home foreclosures devastated the real estate market. Price declines back to levels not seen in twenty years in some places. This reaction occurred due to a massive flight to safety as interest rates declined in some places to levels not seen in literally hundreds of years, as liquidity was injected into the international monetary system to thwart a meltdown of international commerce that could have resulted in the collapse of the world economy as we know it.

So for the last two years the market recovery from Dow 7000 left many if not most retail investors, behind, perplexed and licking their wounds. A most understandable reaction. I have heard every excuse from” I don’t need the money” to a more truthful “ My wife won’t let me, we are buying more real estate” for not investing in the capital markets. Well, no more excuses. We have now made a classic 10% correction in a bull market. Is this the new bottom? I believe it is.

Before I give you my reasons for this I would like to deal with why this has occurred.

From my experience the market is always looking for a convenient excuse to make a move whenever it has become either overbought or oversold. If you look at the recent correction it has been blamed on the “CRISIS in EUROPE”. This crisis has now overshadowed all the other positive market fundamentals. Such as:

1. Great earnings recovery across almost all sectors.
2. The prospect of higher interest rates to slow inflation brought on by recovery
3. Stabilized real estate in general in North America
4. Relatively low earnings multiples in most industries and sectors
5. Low commodity prices for most food stuffs.
6. Still historically low borrowing costs
7. Modestly improving employment picture in most countries

There are more, and the bears would love to knock the ones I have mentioned, but it doesn’t change the fact that we are substantially better off than we were two years ago if only because there is a level of stabilization. After the actions that were taken during and after the melt down of ’07 and ’08 I have to feel that this can be dealt with. The world now has an understanding that it has never had, that what is bad for you is also bad for me and if my population suffers from your problems then I have a problem. Politically you might not like each other but economically there is an understanding that we are “joined at the hip” like never before. This is why we are going forward.

As for the European problem, let’s put this into a little bit of context as to just really how harmful this is:

After the Second World War Europe was devastated; the countries were broke, there was destruction of infrastructure, destruction of political stability, destruction of any form of cohesive economic future. Destruction of hope in the terms of many millions of people. Individual countries survived by surviving. As time passed Europe as a whole survived by relying on neighbors and creating new alliances that ultimately resulted in the European Economic Union (The EEC). Arguably the most important series of agreements in human history. This series of alliances also resulted in a nearly common currency, naturally called the EURO. (Britain and Switzerland maintain their own old script) In the last few years this currency has become a “reserve currency” like the U.S. dollar. A supposed storehouse of wealth, that other wealth can be measured against. Before the current troubles, by most estimates about 20% of the world’s reserves were in Euros’. Very convenient compared to the baskets of currencies that used to clutter up central bank books, prior to the advent of the EURO. This is where the current problem occurs. For the last number of years you could own Euros’ versus the relative value of the U.S. dollar and feel good about the fact that you might be hedged against problems in the U.S. You could also borrow Yen at a zero or near zero interest rate and buy European assets while not holding U.S. dollars. This is very good if it lasts, not so good when it comes to an end. So for the last couple of years you could borrow cheap Yen to buy strong Euros’ to buy cheap U.S. assets in dollar terms. What could go wrong? Well if the European Union collapses there is no strong Euro to base this trade on and consequently the Yen gets very strong as everybody scrambles to pay off their Yen denominated loans. This cross or “CARRY” trade occurred to a lesser degree in a number of other currencies as well. As of this morning, the Yen /Euro cross is at 110. A level it has not been at since 2001. The Aussie dollar is probably the most affected currently having lost 15% of it value as it is being sold for a number of reasons on top of the problems in Europe.

The end result of all of this is a concerted effort by all of the world’s central banks to try and fix this problem:

Look at the charts above and you will see some very dramatic moves. Now look at the chart below and you will see that the EURO has only gone back to where it was before the crisis:

Now you can see that Euro/U.S. have really only gone back to were they were not more than a year ago.

So if you look at all of these charts I have posted, what strikes me is that all of these “currencies” have gone back to levels that are by no means excessive or even record setting over a period of time. What we really have here is a re-alignment of the current currency or economic relationship of the different primary world economies.

Short term dramatic, but really not more than a correction or if you will a slowing down or even a “rationalization” in the economic relationship of these countries. Does it hurt? Yes. Is it a crisis? Sort of.

I suggest that there have been many much greater hurdles overcome since the Second World War in Europe than the one that is dominating the headlines now. The stakes for Europe are un-doubt ably high economically, but are much more dramatic politically. I personally believe that if Europe could recover from the calamities of the last one hundred years that this is simply not much more than a higher hurdle than has been overcome in recent times. Not to mention the vested interest that Japan, the U.S. and China have in the “Union” overcoming this disruption to their own respective trading plans. The last thing that the U.S. needs is a stronger dollar to thwart the gains in trade it has made as the “recovery” takes hold. Or the Chinese loosing one of their great consuming markets. As the French and British stop buying Chinese made goods. I haven’t even mentioned the problems everywhere else(Middle East oil exporters) as they are hung with reserves that are loosing their purchasing power very quickly.

So what we have is a very propitious correction that has allowed us to take another look at the capital markets before they recover from this correction, and move inevitably higher as the world wide recovery continues to expand and the commodity markets also, inevitably move to higher pricing points.

So don’t wait again sitting on the side lines saying to yourself “I should have gotten in last year” here is your opportunity to enter at levels not seen for some time.

Looking forward to talking to all of you soon, give me a call

Ritch Wigham
Mackie Research Capital
http://ritchwigham.com/
PH. (604)-662-1853
T.F. 866-662-1853

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

So why do so many people seem to think that they can take care of their investments better than a professional can?

From the people I have talked to it stems mostly from a dissatisfaction with their past investment advice. Why is this? The answer I get is that if they happened to lose money it was the” broker didn’t understand what I wanted” or just bad advice. If they had “made” money it didn’t seem that enough had been made or that the profits weren’t large enough. There then can only be two reasons for this to occur. Bad broker or bad client. It can not be only the brokers fault if it was not communicated as to the desires of the individual who has opened the account. It certainly is the brokers responsibility to have asked the pertinent questions as to the objectives of the client. If there is a problem it must be discussed. It seems to me that clients will very often say” I just did what my broker told me to do”. That is fine as long as what is being done was in the context of what your objectives were. Ask yourself for example, Would I have bought that junior miner if I was in charge of my own account? If the answer was yes then it must also be yes for your brokerage account. If the answer was “no” the first thing you should ask your broker is why would he/she recommend such a stock when you had made it clear that risk such as that, was not what you had intended!

When I pose that scenario to people that do it themselves I invariably find that yes, they bought that junior miner, and yes they lost money, or made a bit, and no it would not fit their profile as explained by themselves for their objectives.

What’s my point? You cannot blame someone else if you were willing to assume the risk. If you feel that the risk was not appropriate you must decide this before not after the fact. I know plenty of people who maintain two accounts for this very reason. One for long-term investment objectives and one for more immediate speculative reasons. This allows them to be more objective. It is also a very good idea to separate these accounts. Many people try and do it all themselves and find that they cannot separate the two, or combine them and find that neither is satisfied. A very good reason to have either one or both with a professional broker who can understand the objectives of either account as it is laid out by the client. Set out the objectives and understanding for the account and it should be clear what is desired and consequently recommended for that account. This is like buying a bouquet of spring flowers all pretty and lots of colours, when what you really wanted was a dozen roses for your girlfriend. Initially it might be pretty but becomes disappointing as the individual poesy’s die off. Should have bought the roses!

Costs, commissions, charges, fees, call them what you will, nothing is for free. There is certainly the feeling by a lot of the DIY crowd that they can do it a lot cheaper than with a broker. I challenge this. First if you are a very active trader you will always find that a fee structure can be negotiated that is acceptable to both parties. If you are not as active isn’t it worth paying a bit to someone to make sure that your instructions are followed and monitored on your behalf? Almost all the traders I know that actually have a profession and are not brokers or have the time to sit in front of a screen all day, use a broker. Why, because they don’t change their own oil either. It is just more efficient and ultimately they realize that they save way more money paying me then they give up trying to do it themselves. From proper execution to the knowledge that they will be immediately made aware of what is happening with their money when they are otherwise involved with their daily lives. As opportunities arise they can also be made aware of these. Private placements, underwritings warrant issues, all of these are much more efficiently dealt with by a broker. Unless, if all you are interested in is mutual funds (which may be cheaper to acquire through a broker than online) you still require a broker to really be able to access these products.

Lots of people enjoy surfing the web to find the next great idea. How many of those same people understand what they are really looking at. Even if you do it is just good sense to be able to get a second opinion. Some of the best ideas I have related to my clients have come from clients themselves. After I have gone over the pros and cons and made the assessment as to who it would be appropriate for. Great ideas have to come from somewhere, how many have the time too really check the ideas out. Let alone asses the potential risk that it may carry. There is so much on the web now that if you don’t understand the processes for publicly traded companies you are inherently at a disadvantage before you start. It is very hard to distinguish sometimes between a fly by night Exploration Company and a legitimate explorer with properties of merit. When even the good ones have a relatively low success rate you must be able to access a second opinion before you start. Most brokers have access to this type of expertise whether it is mining, high tech or bio-medical. If you don’t know the risks you should always seek out advice from a person who is a professional or has access to an expert in the field. It is called being prudent. Advice costs, negotiate your best deal, and find a broker who understands your needs.

Talk to you soon

Ritch

1. It has been years (like 10 or so) since any amount other than a token was exported from North America to China.
2. The drought that was last year and excess moisture this year has obviously created concerns within the agricultural ministry about supplies for the balance of this year.
3. the need for better more resilient seed in the Chinese market has become more immediate than previous years(Monsanto drought/moisture resistant GMO seeds)
4. the need to import more “FERTILIZER” (read Potash Corp etal) will become imperative.
5. The importation of food crops into an expanding economy suggests that this is a tool that will be used to help control inflation and may signal the importation of other food crops as well(read wheat)

In the coming months this development will become more and more of a factor in the markets. I want to remind everyone what happened a very few(two years ago) with the rice price and fear that hyper priced rice brought with it when drought affected the distribution of the crop world wide. A very small reduction in production creates a very real and immediate impact on pricing. Remember that our old rule of thumb was that” a 3% drop in world wheat production was worth about $1.00/bushel to the farmer”. I am not sure what the numbers are for corn or rice but I am sure that they would equate to a similar movement on a percentage basis.

I believe that this export news is a pre-cursor to another round of food grain tightness that will be very beneficial for our investments in the near term and suggests that the liberal pricing of grains and potash and other crop inputs is has reached a bottom for this recent time period.

To learn more, see this article from the Globe and Mail. (http://www.theglobeandmail.com/report-on-business/economy/boatloads-of-corn-mark-turning-point-for-china/article1566844/)

Talk to you all soon

Ritch

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation (”MRCC”). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member CIPF.

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The European Union is experiencing it’s first real on-shore crisis. The Mediterranean countries plus Portugal have created what may become a devastating set of circumstances for the common currency that the union adopted some years back.

In a nut shell the debt to GDP (gross domestic product) ratio that is used as a bellwether or gauge of a sovereign countries ability to re-pay its debt has been extended past that particular countries ability to re-pay that debt.

Greece is the first of these over-extended countries to come into crisis. The others are Italy, Portugal, Ireland and Spain. Pick your favourite for who comes after Greece. The problem with this Union is that Greece does not stand alone. Due to the common currency the other countries sharing that currency are forced to paddle in the same boat. So if Germany and France don’t come to some form of rescue it impacts them as well.

Originally (a few weeks ago) it was thought that the rest of Europe would come to the rescue of Greece and we would all move forward. A small bump in the road toward a better and stronger European Union. That has turned out to be “not” the case. The IMF (International Monetary Fund) had to be called in because as it turned out Greece was not the only problem for the stronger countries. It has turned out that due to “incestuous” cross borrowing contamination between the worst offenders that the intertwined borrowing of these countries has made it one larger pot of trouble. Greece owes Spain money but Spain also owes Greece money and they all owe each other money that none may be able to pay back. This creates a large problem because it is almost like one great big sovereign debt that has actually no ability to pay itself off. The fear then becomes how do you stop the domino effect of a series of countries, all with the same common currency paying off this debt?

At the moment the bond market is trying to distinguish between the debts of these laggards by penalizing with interest rates the debt of one country verses the other. I.e. Greece v. Germany. The problem with this is eventually how do you distinguish between the players if the common currency has to be devalued while some parts of Europe are solvent and others aren’t?

It is a certainty that at some point (especially if they feel like they are standing alone) France and Germany will not pay the debt of their profligate partners in this fragile union.

That is what the world is afraid of. What happens if the E.U. breaks down?

What happens is that some parts of Europe become insolvent and others regain their old currencies and move forward. The prospects of this are untold. I don’t believe any one can accurately measure what the ramifications of this will be. I can tell you that the whole world will pay and pay dearly. After the melt down of the last two years I don’t believe that the leading countries will let this happen. The pain of the recent past was too severe to have been forgotten this soon. What ever gains we have made to leave the “Recession” behind will not be jeopardized by what are the relatively minor problems of a relatively small country such as Greece. If the problems spread to the other countries in this group a series of events that can not be controlled, may be unleashed, and those effects would be even worse.

The way the world would have dealt with this if Greece had not been a part of the E.U. is it would have been to crush their currency, and impose severe borrowing penalties (interest rates) until Greece had at least started to fix their problems. Since Italy, Portugal, Spain and Ireland are also involved the only outcome is then for the common currency to be devalued and stiffer penalties being imposed on the borrowing costs of all of the countries collectively. This may not seem very palatable to Germany or France but they really do not have a great deal of choice in the matter unless they start the breakup of the E.U itself.

The conclusion then is that the Euro Dollar will decline and the pricing of commodities as we know it will change. Remember that the modest and as yet fragile recovery in the U.S. is largely based on a cheap U.S. dollar relative to the rest of the world. This is a fact that should not be lost on us hear in Canada as this is exactly the mechanism that we used when we allowed our dollar to trade down to the $.60 cent level to stimulate our economy in the 1990′s and early 2000′s

So if I was in Europe, what I would do is buy gold and essentially convert my holdings to U.S. dollars and understand that the U.S. period will do whatever it can to keep their currency relatively week while helping Europe through the IMF to keep their Union together and thus keep the current fragile world recovery in tact.

Till’ next time

Ritch

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation (”MRCC”). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member CIPF.

As I have written in the past, these concerns may ultimately over-ride currency related trade!

See this article on peak gold by the Globe and Mail.

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-RCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation (”MRCC”). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member CIPF.

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation (“MRCC”). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member CIPF.

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

My answer was effectively nothing would happen. And that by the way is what we saw today (03/22/10).

There is only one reason for this:

1.It was already in the market.

Most of the market people that have been around for any length of time already are aware that any one piece of news ,that takes any length of time to come to a conclusion, has already been dealt with by the market. It is only unanticipated surprises that move markets. There is certainly a short term hesitation (like the first hour this morning) but markets will go to where they were headed anyway.

That is not to say that there are many times when the market cannot possibly anticipate the outcome of what it knows is coming. For example, I can think of nothing more frustrating than trying to anticipate the release of most government statistics. Whether GDP or something that should be as simple as a crop report, government release can give markets fits trying to get an advantage before the report in question is actually released. We have been through one of the most volatile periods for reports in the last two years that I can remember. To say these were uncertain times would be an understatement, but the markets seem to have recovered in a steady manner despite slowly improving numbers.

In broad terms, individual reports have a minor effect but can have a major impact when taken collectively. This is arguably why sometimes bad numbers have no effect or good numbers are ignored in the context of the broader market. “If the market didn’t want to go higher it wouldn’t.” “Why didn’t the market go up on the good news?” “That should have been a disaster, why didn’t the market crash?”

These are all questions that people ask when they think they guessed right but still didn’t make any money. They get very frustrated (understandably so) when it seems not to make sense. This is not always the case, but it is usually in the market already. This weekends decision on health care is a perfect example. If you really think about it, individual stocks may be affected but why should the overall market take a hit. The reality is there are probably many opportunities to make some of the nearly trillion dollars of newly printed government money being distributed as there are ideological reasons to dislike this government initiative. So why wouldn’t the market prefer to look at the money and not the esoteric reasons for a negative reaction?

To finish,” Anything that takes a length of time to realize, and is not of a spontaneous nature, has already been dealt with by the capital marketplace.”

In my case, I learned this when it took Bush 1, literally months to finally invade Iraq!

Talk to you soon,

Ritch
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