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. The working title of the book will be 'Just a Melman Minute!"   January 19, 2010 We have just returned from a most enjoyable and satisfying appearance at the Cambridge House Resource conference, just concluded in Vancouver.  Huge crowds amounting to about 10,000 people filled the two venues during the two days and enthusiasm for information regarding the world of precious, base and specialty metals mining is once again clearly on the rise.  Whenever you have twenty or more speakers presenting their observations and opinions, it is inevitable that there will be different takes on important issues and this convention was no different.  However, if a consensus among the speakers did emerge, it was that the next six months will probably reflect some growing optimism that economies will improve somewhat, but by the second half of the year, darker clouds could easily emerge.  Within that concept, monetary metals prices could be range-bound up until the third quarter when some noticeable improvement should set in.  As long-time readers know, that consensus approximates our own expectations. While we were concentrating on convention proceedings, the world continued to generate news and we will take a moment to try and catch up. First, and perhaps of greatest importance, we are overwhelmed by the human tragedy that has taken place in Haiti.  A continual flow of information shows us images of death, disease, hunger, thirst, looting, homelessness, hopelessness and outright despair.  Truly, the Haitian earthquake now ranks with the Christmas 2004 tsunamis as immense tragedies of this century and we can only hope that order, civility and eventually some level of prosperity can emerge from the present chaos. From mining's point of view, one of the most important countries on earth is Chile, with it immense resources of gold, copper and other metals.  Therefore, their recently-concluded election where the conservative, pro-business candidate, Sebastian Pinera, has won election is of more than passing interest. Senor Pinera's initial statements have been most encouraging.  He declared that he will be "an entrepreneurial President" and has committed his administration, as reported by the Wall Street Journal, to "...cutting red tape, enhancing investment incentives and administering the public sector more efficiently."  He will face some opposition from a divided Chilean Congress, but at least his initial statements appear to be encouraging for mining activities.   Speaking of elections, one of particular significance it taking place today in the State of Massachusetts where their citizens will be electing a new Senator to replace the late Ted Kennedy.  Simple mathematics has given the election an importance far above what might be regarded as a normal level.  As matters now stand, President Obama can count on the support of sixty Senators - fifty-eight Democrats and two left-leaning Independents - for important matters under consideration by that body.  One of the tactics used by those in the minority who oppose a particular issue is to stonewall any decision by conducting what is known as a "filibuster", or rounds of endless speeches, making it almost impossible to move the debate forward to an actual vote. The Senate can kill a filibuster by a decision of exactly sixty votes, which means the Massachusetts election takes on enormous importance.  If the Republicans win, Obama loses his sixtieth vote, meaning his legislation could be de-railed by filibusters.  If the Democrats win, Obama keeps his sixty votes and can force legislative matters forward. Strangely enough, although we would personally favor any action which might derail the powerful trend to ever-larger government, it is also worthwhile to point out that a Republican victory could actually redound against the precious metals since the President might find it much more difficult to continue with his programs aimed at continually expanding governmental interferences. We will know the results by late this evening. Another area of controversy is the entire matter of bank repayment of government bailout funds.  While we are hearing stories regarding prompt repayment of those funds, major banks are reporting diminishing operating earnings, making us wonder just how they are able to repay those monies while reporting losses.  The latest news regards giant Citibank which just reported a huge fourth quarter loss of almost $8 billion.  Citigroup also reported that it must continue to set aside huge reserves for future loan losses in their mortgage and credit card operations. Clearly, something is not adding up within the total picture of banks which are now regarded as "too big to fail".  On the one hand, Citibank sold shares to raise cash to repay their Troubled Asset Relief Program (TARP) loans.  Then, on the other hand, they have deducted such repayments from their operating statement and thereby showed a Fourth Quarter loss which enables them to pay no corporate income taxes of any sort.  One cannot help but think that if you or I conducted our affairs in such a manner, the inside of a jail cell would be our reward! Much of this was a foreseeable consequence of government meddling deeply into economic matters.  We believe there will be many more fiascos to come. One last area of significance is the world of transportation services, particularly in regard to the promised wave of onrushing prosperity about which we have heard so much in recent months.  While several major railroads such as Union Pacific, CSX and Burlington Northern Santa Fe have reported improved earnings results over the past quarter, there are signs emerging that their improvement might be short-lived.  Carloads in the week ending January 9 were down by 12% from 2009 and by 28% from 2008.  Railroads also reported a decline in Intermodal shipments, meaning those shipments which combine rail and truck services. As can be seen, the Dow Jones Transportation Average has been confined to an unusually narrow trading range for the past month.  It will be most interesting to see how it emerges from this range. Japan Air Lines also reported negative news when it accepted a Japanese government rescue program.  Under the government's terms, JAL must cut 15,700 jobs - or about one-third of its workforce - and slash 34 of its domestic and international routes.  This certainly must be considered an unusual development within a period of rising economic strength. Markets this morning have made several significant moves.  As of 10:00 AM PST, the Dow Industrials have recovered virtually all of last Friday's 100 point loss while in Canada the TSX Index is close to unchanged.  America's Greenback has been stronger in currency markets with the DX Index ahead by a full 50 points.  However, despite the stronger US Dollar, precious metals are now moving higher with gold up about $9 to near $1,140, silver ahead by 15 cents and platinum - the group's strongest performer of late - is up by another $22.  Base metals have returned to nearly unchanged from earlier losses, mining share indexes are now posting small gains and Crude Oil is up slightly to just above $78 per barrel. - - - - - All price quotes US Dollars unless otherwise noted. Next Melman Minute scheduled for tomorrow, January 20, 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.