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“I have come to a conclusion that one useless man is a shame, two is a law firm, and three or
more is a congress.”

                                                                                                                                                    John Adams

January
27, 2012

Global Markets

USstocks sagged in the second half of the session
yesterday; leaving the Dow with a modest loss of 22 points. A pullback in bank
and tech shares, which have posted strong gains so far in January, weighed on the
markets, after disappointing data on new home sales. Concern over whether a
Greek debt swap deal will come to fruition also weighed on sentiment and led
investors toward the safety of US Treasuries and German debt.

New home sales fell 2.2% in December, while many
analysts had hoped for a slight increase. On a brighter note, durable goods
orders rose more than expected.

Futures point slightly lower this morning, ahead of
another important round of economic and earnings data. The key piece of data
that could impart impact the markets considerably is the fourth-quarter GDP
number. The mean analyst expectation is for around 3% growth, but estimates
vary anywhere from 2.5% to 4.5%.

Asia’s
stock markets stayed in a tight range as well, with a mixed performance among
the regional indices. The Nikkei fell by just eight points, while the Hang Seng
inched 0.3% to the upside. Although it is but a shortened trading week in Hong Kong, this marked the sixth consecutive positive
finish for the Hang Seng. Gains for banking shares were offset by a down day
for property developers.

Stocks are drifting along the flat-line in Europethis morning as well. Some weakness among Bank shares
and mining stocks has left the FTSE 0.3% to the downside at mid-day. The French
CAC has seen similar losses, while the German DAX has set its own pace without
upside of 0.15%.

There have been a lot of mixed signals coming out of
Europe this morning, which has kept investors
on the edge of their seats. Olli Rehn, Commissioner of European Union Economic
and Monetary Affairs, said that the parties involved in a Greek debt swap deal
are very close to reaching an agreement, but also said “the next three days
will be very crucial.”

New data in Europe
also shows a decline in private lending, which is something economists have
been concerned with and watchful for; fearing the possibility of a damaging
credit crunch.

Italysuccessfully sold €11 billion ($14.5 billion) in
debt at auction today, at substantially lower yields. Unemployment in Spain, on  the other hand, climbed to 22.9%; its highest
level in 15 years.

Gold & Precious Metals

Gold appears to be in a bit of a
consolidation period, as prices inched nearly $10 higher again yesterday and
have leveled off a bit. With a slight $3 gain this morning, gold is now trading
at $1723, its highest level in about 6 weeks.

It’s all about easy money, after Fed Chairman Ben
Bernanke said it would likely be another three years of near-zero interest rate
policy for the Fed. Bernanke also hinted that he had his finger on the trigger
to initiate further quantitative easing if necessary.

What we have here are growing prospects for

long-term debasement of global fiat currencies, which is leading some investors
to see gold is the only viable alternative for while. Bank of England Governor
Mervyn King also hinted this week that the BoE stood ready to increase its bond
purchases if need be, after new data in the UK showed fourth quarter GDP had
contracted by 0.2% from the prior quarter.

The World Gold Council, in its quarterly commentary,
pointed out that historically, a strong pullback like we saw at the end of 2011
typically precedes another strong rally for gold. The report also noted that
gold holding exchange traded funds built up their positions in the fourth
quarter.

Energy and Commodities

Commodities are little more mixed this morning, despite
some underlying weakness on the Dollar. Many traders are in a holding pattern
waiting for clear direction as economic data, and the situation inEurope, continues to leave some doubt.

Crude oil has begun to see a tighter trading
range as well; itching about 0.5% higher this morning to $100.19. The prospects
for an extended period of easy money from the Fed provided a bit of a boost to
the energy markets this week. On the other hand, this week’s inventory data was
a bit vague, and disappointing in some respects.

The EIA Petroleum Status Report showed a
surprising decline 3.44 million barrels, after Tuesday’s API report showed an
increase of 7.33 million barrels in US crude inventories. Gasoline stockpiles
grew by another 3.72 million barrels; a third consecutive increase. The API
numbers showed a drop of 573,000 barrels.

Meanwhile, Iransays it is ready to go back to
the table to discuss its nuclear program and says it is the West but that is
unwilling to do so. Tensions with Iran continue to represent a factor
that could quickly impact the marketplace on any given day.

Uranium Investing

At least one industry
expert, Thomas Drolet, President of Drolet & Associates Energy Services,
says he sees a supply crisis in the uranium industry by about 2016. He points
out that long-standing supply is already dwindling and will be a growing issue
in the next year or so. In 2010, 118 million pounds of uranium was mined, while
global consumption was about 190 million pounds.

Uranium spot prices
remain generally unchanged at around $52, but there continues to be a lot of deal
activity within the industry.

China Guandong Nuclear
Power Corporation has upped its stake in Kalahari Minerals to nearly 30% as it
slowly moves toward a complete takeover

Elsewhere, Gold One
International has finally completed its $250 million acquisition of Rand
Uranium in a deal that was first announced back in May 2011. Gold One received
approval from South Africa’s
Department of Mineral Resources in late December 2011.

Elsewhere, Rio Tinto is
wrapping up its Hathor Exploration acquisition, by buying up the small
percentage of shares it did not already own. Rio
said it will then de-list Hathor from the Toronto Stock Exchange.

Shares in Russian-owned
miner Uranium One are on the rise after the company announced it had produced a
record 10.7-million pounds of the nuclear fuel in 2011, which is a 45% increase
from the prior year.

China’s Ministry of
Environmental Protection has put together a draft of new safety rules for its
nuclear industry. Once approved by the government, China may be ready to move ahead
with new nuclear projects. No details of the draft have been released, but the
ministry says that the new safety rules are “tougher” than earlier regulations.

Rare Earth Investing

In an effort to support softening rare earth
prices in the marketplace, China
has announced another cut in its rare earth export quotas. The Commerce
Ministry announced a 27% reduction in exports for the first half of 2012. It
should be noted, however, that China
actually fell short of its quota last year, as weakening global economic
conditions also reduced demand.

A new Energy Department report, however,
suggested that several critical rare earth elements would remain in short
supply in till at least 2015. The report highlighted dysprosium, terbium,
europium, neodymium and yttrium as the key elements to watch.

China’s Ganzhou Qiandong Rare
Earth Group has signed a joint venture agreement with Great Western Minerals
Group to develop a rare earth separation plant inSouth Africa.

Germanyis also getting into the
game. German miner Deutsche Rohstoff has said it will develop an estimated
deposit of 38,000 tons in eastern Germany. The subsidiary set up for
the rare Earth project received €2.2 million from German investors and plans a
public offering later this year. Exploratory drilling is planned in the Spring.
This

Molycorp recently announced that about 78% of its
Phase 1 rare-earth production at its Mountain
  Pass, California
manufacturing facility has been committed. Having a product sold before it’s
reduced is certainly a positive development for any company. One thing that
remains in question for Molycorp is whether they will be able to process the
critical heavy rare earths that are likely to be in the greatest demand.

The future of rare earth
profits will lie largely in the heavy rare earths. This does pose a problem for
some would-be manufacturers, as the refining process is complex and expensive
and, as such, prohibitive to many junior miners. Molycorp, for one, has solid
potential in this arena but does not, as yet, possess the capability to process
the “heavies.” It could pose a $500-$600 Million problem that has not been
discussed openly.

Public Finance and Fixed
Income

Treasuries have pulled back after a two day rally, ahead of
today’s US GDP data. Analysts expect to see growth of about 3% in the fourth
quarter, although estimates vary considerably.

Italysuccessfully sold €11 billion ($14.5 billion) in
debt at auction today, at substantially lower yields. Unemployment in Spain,
on the other hand, climbed to 22.9%; its highest level in 15 years. Uncertainty
in Europe has led German bunds higher fro
three consecutive sessions.

New data in Europe
also shows a decline in private lending, which is something economists have
been concerned with and watchful for; fearing the possibility of a damaging
credit crunch.

Chairman Bernanke pledged to keep rates low for at least three more years, and hinted that the Fed stood ready to initiate further quantitative easing if necessary. “We need to be thinking about ways to provide further stimulus if we don’t get improvement in the pace of recovery and a normalization of inflation,” Bernanke told reporters at a news conference. Prospects for the Fed purchasing more bonds, has added some support to Treasuries.

In Europe, there
seems to have been some progress on the Greek debt swap deal. Reports have
surfaced that private bondholders have agreed to take slightly lower rates on
the new long-term bonds they receive. They originally called for a rate of 4%,
which European finance ministers essentially rejected. Private sector creditors
will now put forth a proposal in which the average yield will be 3.75%.

International Currencies

The Dollar continues to drift lower this morning on the
back of safe haven demand and prospects for an extended easy money policy from the
Fed.  At
the conclusion of the two-day FOMC meeting, Chairman Bernanke said rates would likely remain at near zero
fro three more years, and hinted that the Fed stood ready to initiate further
quantitative easing if necessary. “We need to be thinking about ways to provide
further stimulus if we don’t get improvement in the pace of recovery and a
normalization of inflation,” Bernanke told reporters at a news conference.

The Dollar is about 0.22% lower on the Euro and just
0.09% down on the British Pound.

Bank of England Governor Mervyn King also hinted
this week that the BoE stood ready to increase its bond purchases if need be,
after new data in the UK showed fourth quarter GDP had contracted by 0.2% from
the prior quarter.

Economic News & Corporate Earnings