A Melman Minute
| By | Leonard Melman |
|---|
NOTE: Mr. Melman will be presenting a workshop entitled "Decisive Metals Action Likely in 2014” at the Cambridge House "Vancouver Resource Investment Conference" scheduled for Vancouver, BC this coming January 19 and 20th.
For quite some time, I have noted the repetition of a somewhat suspicious pattern. It seems that every time a potentially serious securities market decline appears to be underway, mysterious buying suddenly steps in, recovers the earlier losses and the markets then continue on their pathways to higher levels. We now have another example.
Please note the sizeable drop of 179 Dow points which occurred on Monday, driving the Dow Industrials Average down below previous support and seemingly opening the doorway for more declines. However, starting with Tuesday's opening trades, "good news" mysteriously popped up and by this morning the Dow had its Monday losses, plus some additional gains.
Of course this could be a matter of objectively random releasing of information, but I confess I do harbor some suspicions that the news background is being manipulated to make it appear that all is well and that increasing levels of prosperity are on their way. The political advantage of continually advancing markets is obvious - as are the negative impacts of such developments on our world of precious metals investments.
Perhaps a day is coming when the general public will question the timing of government releases more closely, but for the moment, it appears that this kind of information is widely accepted - and acted upon.
IS SOCIALISM ON THE RISE?
First, let's set our definition of the term 'socialism'. According to "Webster's New Universal Unabridged Dictionary", socialism is: "The theory or system of the ownership and operation of the means of production and distribution by the society or community rather than by private individuals." I would also note the term implies a preference by a nation or community for government controls over industry and distribution rather than private capitalist controls.
One of the broad themes at The Melman Report is that government intervention in the economy - a form of socialism - is prevalent and that it tends to be an impediment to economic efficiency. Therefore, it is our opinion that continuing high levels of such interventions will cause governments to take aggressive measures to compensate for these inefficiencies and those measures, particularly including central bank creation of fiat currencies to finance government deficits, by and large will mitigate toward higher precious metals prices over time.
It therefore becomes important for us to periodically attempt to evaluate the growth - or diminishment - of the forces of socialist thought. When observing the scene as it relates to the giant U.S. economy and society, there is ample evidence which points to a growing move toward more socialism.
The political left has just won a major victory in the race for Mayor of America's financial capital, New York City with the triumph of self-styled 'Progressive' Bill de Blasio. Among other campaign pledges, he promised to raise taxes on the rich (see our new "Melmania" to be posted shortly) and is regarded as a friend of civil service unions, environmentalists and other political bodies. He has long been a supporter of adding to government regulations regarding gun control, smoking bans, soda-size restrictions and others. He also received strong support in his campaign from Hillary Clinton, the Democratic Party's present leading presidential candidate for the 2016 elections.
Nationally, America appears to be heading further Left. While the Conservative's leading presumed 2014 Presidential candidate, Chris Christie is buried in new controversies, Hillary Clinton is apparently moving from strength to strength with growing popularity among blacks, women, civil service unions, governmental financial recipients, etc. I believe it is going to take a Republican candidate of unusual strength and popularity to defeat Clinton, should she win the nomination, and at this moment, that seems to be a rather dim prospect.
I have two concerns about this situation. First, it is impossible to ignore the reality that in her college days, Hillary was a dedicated Fabian Socialist, an organization determined to advance socialist thought, but initially at a gradual rate, then reaching a crescendo. In fact, the initial founding documents of the Fabian Society - originally named after a Roman general who counselled 'delay' in his war with Hannibal - tell us:
"For the right moment you must wait, as Fabius did most patiently, when warring against Hannibal, though many censured his delays; but when the time comes you must strike hard, as Fabius did, or your waiting will be in vain, and fruitless." One cannot help but wonder if a Presidential victory by a once-dedicated Fabian Socialist like Hillary Clinton might not presage that "time."
The second reason is that there is presently a tenuous majority of conservatives on the U.S. Supreme Court, but several of them are now aging rapidly and through death or retirement, new vacancies might arise - and with Obama as the present leader and the prospect of Clinton following behind, the potential for leftist tilting of the Supreme Court would become increasingly likely.
One troubling trend of socialism is the drive to have government regulate a growing list of activities, particularly including resource development - as illustrated by the recent tirades against pipelines, oil transportation by train or tanker, tar sands recovery activities and, of course, mining in virtually all its forms.
We believe any increase in socialist political influence would make even the most minor relief from these already-enormous bodies of regulations most unlikely indeed.
The Congressional elections of November 2014 are growing near and they should provide us with a genuine litmus test of prevailing political strength. It will be most interesting to watch trends develop as we approach that event.
MORE ON CHINA
In a recent "Melman Minute" we noted that questions are being raised regarding continued growth of China's economy. If anyone doubts the importance of that question, a news release received this morning should allay such doubts.
The information deals with the introduction of Apple's iPhone which will be sold through the Chinese firm, "China Mobile." According to Canada's Financial Post, these instruments cost up to $874 if purchased separately but are 'free' if the purchaser signs a contract obligating him/her to fees of a minimum of $2,328 over the next two years.
We find it remarkable that early estimates show pre-orders of over one million of these devices and in-store sales will not even take place until January 17. To us, this demonstrates amazing evidence of the latent power already existing within China's domestic consumer economy - a power which could also indicate a growing demand for commodity raw materials through the years - if the Chinese economy continues to progress.
As of 9:10 AM PST, financial markets in both the USA and Canada continue to rally sharply with the Dow Industrials up another 115 points following on yesterday's similar move and the TSX index has gained 75. Precious metals have retreated slightly with gold down by $5 to $1,240 while silver is off by 7 cents to $20.18. Base metals are ahead by more than one percent on average while mining share indexes have gained a similar amount.
In other markets, the US Dollar Index has gained 36 basis points to 81.15; Crude Oil is ahead by a strong $1.89 to $94.48 per barrel and the TYX Index of rates on US Treasury 30-yer bonds has slightly from recent selling and is now ahead by 28 basis points this morning to 3.828%.
All quotes US$ unless otherwise indicated.