It’s often said that commodity shares should lead the actual commodities. While this isn’t always the case, it often is at market turning points. Months back we noted the relative weakness in Gold and Silver shares and deemed it a reason for caution. It took more than a few weeks but our caution was vindicated as Gold and Silver shares fell more than 20% in April and May. Now we are seeing the reverse which should delight gold bugs and gold bulls alike.

In this weekly chart we show GDX (large caps), GDXJ (large juniors) and GLD (Gold). Note how the shares peaked at the beginning of April while Gold continued higher for the next three weeks. In the past two weeks, Gold has closed lower but the gold shares did not. The gold shares led the market down at the most recent top and now they are sporting a positive divergence that comes at a time when they are bottoming. That makes the divergence more meaningful.

…view charts and read more HERE

Imagine a doctor who administers an elaborate treatment for a man suffering from multiple broken bones, joint arthritis, and fallen foot arches. The quack doctor orders massive amounts of liquids as though he has a horrible case of dehydration. The confused doctor also permits unlimited freedom of movement around the hospital and its grounds to the patient, as part of the blunt treatment. The man still cannot walk right or breathe normally, has trouble lifting any significant weight with the arms, and stumbles around from shaky legs. But he has plenty of fluids and freedom to roam. With the heavy mistreatment that is badly off the mark, he has a new problem, diarrhea and bloat together. His doctor has clear failing incompetence, but still is given respect. The doctor is the US Federal Reserve, led by the poor economist who never ran a business, the mad professor from Princeton University. His claim to fame was revisionist history of the Great Depression. He was chosen to be the bagholder, to print money until no tomorrow. The USFed balance sheet is almost totally ruined, without hope of repair. The clumsy professor posing as USFed Chairman actually admitted in public that he is confused why the USEconomy remains moribund, unresponsive to all the special treatment administered so thoroughly. Bernanke admits his incompetence and confusion. The national economy desperately requires a housing market revival that cannot come since banks are constipated with foreclosed homes in still rising inventory. The misguided licensed doctor continues to ply his trade, directing the wreckage, confused at the helm. Now the hospital is overrun by victims of the USEconomy, sinking under the weight of debt.

At least the health care sector is expanding as a business, the government sector too. Neither is productive. Meanwhile, the nation sinks into a depression, the debt approaches a default, and the USDollar faces extinction through revolt, rejection, and evasion. The nation suffers from lost direction, absent leadership, and unspeakable corruption from the climax of the Fascist Business Model introduced by the last administration with large doses of fear. The dominant themes in the USCongress and Executive branch are clearly paralyze, polarize, and partisan. Tainted money has been followed by tainted morality, policy, justice, and representation, enough to invite a public response. Let’s take a quick look at numerous pressure points, broken parts, and centers of ailment. The doctor is extremely busy in confusing both the patient and anxious family. They are repeatedly told the patient is on the mend, but he keeps falling down when attempting to move on his own power. The family has lost faith in the doctor, but no other medical professionals seem any more enlightened.

THE ULTIMATE PROBLEM OF INSOLVENCY

….read more and view charts HERE

Dan Rodricks, Host, Midday: I’m Dan Rodricks, and you’re listening to a special edition of Midday we call Power Ahead, The Energy Future. We finish our discussion about energy with a look into the coming decades, the innovations ahead, and the power sources that are probably going to be with us for a while. Our guests include Byron King, resident energy expert with Baltimore-based Agora Financial. He’s the editor of Outstanding Investments and Energy & Scarcity Investor. Byron King is a Harvard-trained geologist, a self-described old rock hound who keeps an eye on energy, mining, and precious metals for his readers. Byron King, thank you for joining us on Midday at WYPR in Baltimore.

Byron King, Agora Financial: It is a pleasure to be with you. Thank you.

Rodricks: Byron King, please draw a picture of the year 2031 in terms of energy. What does the world look like? What sort of power-related technologies will be in wide use that are not in wide use now? Could you draw that picture for us?

King: Well, it’s a great question because twenty years is a long time. Twenty years ago, people didn’t know what cell phones were. Now they’re ubiquitous around the world. Twenty years from now, it’s going to look a lot the same, and there’s going to be some things that are different. Much of the world is powered by coal today. Much of the world will still be powered by coal in future years. We might burn it differently or what have you, but when people build coal plants, they’re built for 50 years, and the Chinese have been building hundreds of them, so they’re not going to go away. Natural gas is going to take a much bigger share.

We’re starting to figure out how much more natural gas there is out there than people estimated. An absolute revolution in technology in the past few years has been in this shale gas development… Nuclear has taken it on the chin in the last month or two, but nuclear isn’t going anywhere.

I think the long-term view is that we’ve had problems with the [nuclear] technology from the ’50s, ’60s, and ’70s. There’s different technology today, and I think it’s going to be around. And don’t count out oil. There is a lot of oil out there. There is a lot of oil yet to be found. And there’s a lot of oil that’s going to stay in the system for many decades to come. And when you look at it in the year 2031, I think that you’ll see perhaps up to 10% of the world running on what we consider alternative energy, alternative fuels, things like that. But I think that the main base of energy and of power to run things is going to be what we have today, natural gas, oil, and coal, with nuclear.

And lots and lots and lots of different technology in how it’s produced, how it’s distributed, how people use it, efficiency, conservation, things like that.

Rodricks: I think everyone agrees that a post-carbon world is not possible in 20 years, but Byron King, what about 50 or 60 years? You say many, many decades. There are a lot of people listening who are probably a little disappointed to hear that because they’re hoping that with renewable energy sources and more innovation, we’ll be able to get away from king coal and big oil.

King: Well, you can take your renewables, and you can double them, double them again, double them again, maybe even double them again. And in terms of running the world, you might get to 10% of the total world power system. I’m sorry to break the news to you.

Rodricks: You mean in 20 years.

King: In 20 years. In 50 years, what will things be like? That’s a good question. When the Wright brothers flew an airplane in 1903, did anybody know that in 1953, people would have broken the sound barrier? So a lot of things can happen in terms of technology. Much of how people use energy is not – it’s obviously technical, but a lot of it is sociological. I mean, 50 years from now, that’s two or three generations down the road. People might have different attitudes towards what they do, how they do it…

Rodricks: Byron, you touched on nuclear just for a moment. What is your take on nuclear? Could there still be a nuclear renaissance in the United States and Europe and Asia post Fukushima?

King: Post Fukushima, yeah. There could be actually. Right after Fukushima, I was thinking this is the nail in the coffin for nuclear. Just kiss it good-bye. But really, in terms of the world reaction to it, and I follow these kind of things in Europe, in China, in Russia, in parts of the developing world, Brazil, South Africa. I mean, people were remarkably sanguine about it. And among the policymakers globally, there is this idea that Fukushima was a 1950s and 1960s siting…

I mean, I don’t think people understood the seismic hazards in the ’60s the way they do now. If it’s ’60s technology in terms of nuclear, what the nuclear guys are telling me is that today, with passive nuclear systems, you wouldn’t have that issue of the meltdown in Fukushima. And really, it was the failure of 1960s era diesel generators to cool the reactor that brought the resulting meltdown. So there’s a lot of thinking that goes into this, a lot of systems thinking that goes into this. I don’t think people are giving up on nuclear, certainly not globally. Here in the US, we have to fight about everything, so the jury is still out on that one…

Rodricks: How about this on policy? How about we say to big oil companies, you’re getting some subsidies from us, some tax breaks. We’ll continue those if you develop more renewable energy.

King: Actually, you don’t really have to say that. All you have to do is buy shares in companies like Chevron or Exxon. The biggest geothermal power producer in the world is Chevron Oil Company…[Also] Chevron has a huge effort going with Weyerhaeuser, the big tree-growing company to use tree mulch and turn it into biofuels. I mean, one of these days, you might buy biofuels for your car. You’re not going to buy them from Biofuels, Inc. You’re going to buy them from Shell and Exxon and Chevron, the usual suspects. They’re already doing that.

Rodricks: Yeah. At Exxon Mobile just a couple of years ago at a shareholders meeting, they laughed down these ideas of investing in green energy.

King: I’m not sure about that one. All I know is that they put their money where their mouth is. And Exxon has a very aggressive development program with a California biotech company in terms of algae. It’s third-generation stuff. If you want to talk about biofuels, one of the worst subsidies, one of the ones that we ought to do away with tomorrow is the ethanol subsidy. I mean, the idea that 40% of the US corn crop is going to turn into ethanol to run cars is doing nothing but driving up food prices across the world. And in terms of net energy, it’s almost a loss really in terms of the energy that goes in versus the energy you get out…

One of the things that you have to keep in mind as well, is understanding the concept of the grid. And it’s transmission wires, it’s pipelines, it’s everything because it’s one thing to create electricity or create a thermodynamics, but it’s another thing to get it to where you need it.

You’ve got your production, but…you need transmission, and transmission is your market enabler. And that is another of the great bugaboos. It’s a huge technological challenge… Power distribution, power transmission is a massive problem in this country, especially rebuilding the old grid that we have. Rebuilding it with new, modern stuff. When you see just the kinds of cabling and wiring that it requires, these are not your father’s or your grandfather’s little copper wires with some plastic wrapping or something.

These new cables that bring the power in from offshore or that take the power out to an offshore platform or that bring the power from the windmill farm up in the mountains down to the city, these are incredibly technologically complex wires. These are works of art. They are engineering marvels just the wiring alone.

Rodricks: Okay, so if you had $1,000 to invest in any facet of energy what would you do?

King: If I had $1,000.00 to invest in the future of energy, I would…buy one stock and it would be a company that mines and manufactures graphite because I think that graphite is one of the unseen, under-the-radar products that everybody is going to need no matter what they do in terms of the future of electricity. If you have an electric car, it’s not going to be run by lithium batteries. You might as well call it graphite batteries. There’s more graphite than lithium in those batteries.

Rodricks: Thanks, Byron!

Regards,

Byron King
for The Daily Reckoning

Byron King is the managing editor of Outstanding Investments and Energy & Scarcity Investor. He is a Harvard-trained geologist who has traveled to every U.S. state and territory and six of the seven continents. He has conducted site visits to mineral deposits in 26 countries and deep-water oil fields in five oceans. This provides him with a unique perspective on the myriad of investment opportunities in energy and mineral exploration. He has been interviewed by dozens of major print and broadcast media outlets including The Financial Times, The Guardian, The Washington Post, MSN Money, MarketWatch, Fox Business News, and PBS Newshour.

TIMER DIGEST SIGNALS:

Stocks – NEUTRAL –

My work called the bottom on June 16 following the formation of Positive Leibovit Volume Reversals and I flipped from a ‘Sell’ to a ‘Neutral’ signal. I also traded long index ETFs in my Platinum service. However, I did not post a full-fledged ‘Buy’ signal. My expectations were for a seasonal pre and possibly post July Fourth rally and not an immediate move back to new highs. The Dow Transports pushed once again into new record highs. As a leading indicator, we cannot ignore this event. Overall, it appears we’re headed to new highs, but it is still ‘summer trading’ and recall last year we had a strong July, but a weak August.

Gold – BULL –

Volume is short-term negative, but we know this can change quickly. This correction is seasonal and expected. You should not be surprised. Nothing has changed. The big picture uptrend is very much intact. Remind me when gold is trading over $2000 just how scared you got during the correction. We’ve been there before. With the U.S. economically, socially, politically and spiritually in decline, the US Dollar is going to weaken and gold is going to strengthen. Also, don’t expect the financial press or Wall Street to support gold. That’s akin to asking a car salesman to sell and demonstrate computer software. It is just not in their realm of expertise, understanding or line of making of living.

Bonds – NEUTRAL –

Bonds are negative until proven otherwise, but we could get a pop here, especially if we see the market sell-off again reacting to some external news event. But, the writing appears to be on the wall and I believe being OUT or short the bond market is the best near-term advice I can give you.

The above is just a portion of Mark’sVRTrader. Much more analysis contained every day in Mark’sVRTrader Silver or Platinum Service

Mark Leibovit’s Special Trial Offer: Use this month to kick our tires. Pay 50% for the first 30 days (No refund) and sample our Silver or Platinum service and then decide what works best for you. If you aren’t 100% ready to move forward, simply email us to cancel one week before your 30 day 50% off trial subscription ends and it will be canceled and you will not be charged ANY FURTHER, no questions asked. Just send an email to mark.vrtrader@gmail.com or call 928-282-1275 to cancel. You will receive an emailed confirmation of your cancellation at that time.

“I’m surprised gold is as cheap as it is given all of the money we’ve already printed”

Click here to read more…