About this time last month, I warned that the U.S. could be near bankruptcy.  Simon, who I don’t always see eye to eye, commented “…US will never default as long as USD is global trading currency.”  Today, Harvard professor and former IMF chief economist Ken Rogoff says the United States has been in “default” before, when it went off the gold standard, and there is no reason why it won’t do so again.
Rogoff says we also defaulted in the depression when we raised the price of gold from $20 an ounce to $35.

For nine years in a row, the price of gold has finished higher than the previous year, going from $225 to $1225. We carry our reserves, if they are still there at Ft. Knox, at $35 an ounce. Soon, in order to save our country, our government will raise our stated price to the current market price or some price infinitely higher. We will recognize the obvious. We can not pay back or even service our massive debts!

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Mike Landfair

Jim Sinclair wrote “The final Pillar in the gold bull market is a bear market in US Treasuries.  …The bull market in gold moved from $400 to $887.50 in the 1970s as interest rates rose from 3% to 14 7.8% on Ten Year money.”

Eric De Groot’s Insights is worried about Federal outlays vs income and shows the connection to Gold.

If I were the captain of the “Airplane U.S.” I’d say, “Hang on folks, it’s going to get a little bumpy!”

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Mike Landfair

The principle behind the rule is simple. If you can’t pay off all of your foreign debts in the next 12 months, you’re a terrible credit risk. Speculators are going to target your bonds and your currency, making it impossible to refinance your debts. A default is assured.

Stansberry states we owe $880 Billion to foreigners in the next 12 months, yet have only $500 Billion in gold, oil and foreign reserves. Domestic savings total about $600 Billion so we are about $3.0 Trillion short.

We could print the money to buy our debt, monetization, but that would accelerate foreigners dumping cheapening dollars due to increased supply.

Do we see any signs of gold or oil bottoming, the dollar topping or interest rates beginning to move up? Jim Sinclair has a chart with implications for Gold.

He writes:

The sixth setup in money flows has been generated. These setups are rare and always precede big moves. It is simply a matter of time now.

How about Treasuries. The 30-year Treaasury bond chart looks suspiciously like it could be readying for a move through 4.75%:

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Mike Landfair

In today’s short video he takes a fresh look the S&P 500 and what he thinks it is going to do in 2010. We will also be looking at an important “Trade Triangle” that has just flashed an important signal for this index.

As always our videos are educational, free to watch, and there’s no need to register. Enjoy the video and please feel free to leave your comments on our blog.

All the best to you in 2010. Please enjoy the article and  comment below, follow me @movermike and Khrono Stock
Mike Landfair

Strength has alternated between Gold out performing Oil then Oil outperforming Gold. When the daily chart goes up Gold is outperforming Oil. The Daily chart shows the PPO about ready to crossover and this is the forth bottom in the 13 area. Result: Be long Gold, Short Oil!

The weekly chart shows the strength in Gold versus Oil from June, 2008 to February, 2009 when Gold fell from $989 to $681 and back to $900, but oil fell from $147 to $40.

From May, 2009 to the present Gold has gone from $859 to $1,226 and Oil from $60 to $84. Bottom line: I don’t see any reason to short Gold and this does not appear the time to choose Oil over Gold

Brad Stafford fills in for Adam Hewison and I have a great new video for you. I’m sure many of you read that title and your mind went in the gutter, but today I’m going to show you a whole new meaning for this acronym and how it applies to gold, silver, and platinum.

These three markets have a lot of volume, government implications, and technicals lining up for potentially great trades. Gold makes a record high, then pulls back. Silver is inching towards an all-time high level and platinum is making people rethink their decision to go with a white gold wedding band.

Where do you stand in these markets and maybe more importantly, where should you stand?

Click here to find out what W.T.F. really stands for and what does it have to do with gold, silver, and platinum?

You’ve got to watch the video to find out.

For the ninth year in a row Gold finished higher year over year. The close on December 31, 2008 was $879.98 and with an hour to go, Gold is currently at $1,096.30. That is a gain for the precious metal of 24.6%. Silver is currently just shy of $17 up from $12 on December 31, 2008, up 41%. The DOW is up about 24%

I was registered as a broker in Sept. 1968. I was told by the man in charge of our training that we would never see these levels again in our lives. Little did I know that it would be 14 years before we broke above the 1,000 level for good.

Twiggs draws in trendlines in gray showing support (7,000) and resistance (12,000) levels. We may have another long trading range like we had under 1,000 or we may have a broadening top like I’ve drawn in. The point is we’ll survive. I was very successful as a broker all through the time under 1,000 and that made it easier to make money and get clients after 1982, for I had gone through the fire and had become tougher.

I wrote then, “With all the political debate about government run health care, are (the major healthcare companies) suffering or are they rising with the market? I took a look at the ETF of U.S. Healthcare Providers (IHF). From a high of about $64 in 2007 to a low near $25, a Fibonacci retracement of 38.2% at the $40 level had been the upper limit on IHF, until this last week.

“Monday evening came the announcement that a “group of six senators is going to eliminate the public option from their version of the health care reform legislation.” The Public Option “literally means that Americans would have the option to choose public health insurance. Having the public health insurance option means that Americans would have a choice of keeping the health insurance they currently have, buying health insurance from one of the many private health insurance companies, or choosing a public health insurance plan.”

“If you eliminate the public option, the major health care companies win and that was reflected in the stock prices.

“Here’s the way I see it. Go long IHF if you believe Obama’s health insurance won’t get passed. Go long IHF if you believe the public option will be excluded from the bill. Go short if you believe the insurance companies will have to contend with a government-run alternative. Right now all arrows ar green and pointing at the sky!”

Here’s the latest chart of IHF from MarketClub:

http://khronostock.com/blog/movermike/files/2009/12/ihf-daily-12-21

We are now at the 61.8% retracement, MACD is over bought, and we’ve run back up to the underside of the first bullish trendline. The arrows so far are all green, but here’s a place to be cautious if long the ETF. The circled area denotes where we were on August 2nd.

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Mike Landfair