Gold World News Flash |
- GoldSeek.com Radio Gold Nugget: Gerald Celente & Chris Waltzek
- Could Peak Oil Reverse Globalization?
- Buying Silver and Avoiding the Sharks
- Utah: Forget dollars. How about gold?
- Gold Seeker Closing Report: Gold and Silver End Slightly Lower
- TEPCO Stock Implodes As Radioactive Iodine In Fukushima Seawater Now 3,355 Above Limit
- In The News Today
- Hourly Action In Gold From Trader Dan
- Jim?s Mailbox
- Bix Weir: World Gold Council supports gold price manipulation
- Simon Black On Another Form Of Inflation
- Comprehensive First Quarter FX Outlook From GTAA
- A Close Below $1,392 Sends the Gold Price Tumbling
- Robin Griffiths - $8,000 Gold is Not Unreasonable
- Rising prices will not deter gold sales
- Unmanipulated US "Misery Index" Hits All Time High
- Fight or Flight
- Tennessee Considering Alternate Currency
- Jim Sinclair: We are Way Over the Edge Already! Got Gold?
- Debunking gold bears
- Warning Signals for Gold Investors
- Gold ends modestly lower, extends losing streak
- Rare Earth Stocks Breaking Out
- Gold Daily and Silver Weekly Chart
- 18 Days Later…
- Diverging Silver Spot and Equity Prices Call for Caution
- Iamgold: Gold Stock With a Rare Earth Kicker
- Rick Rule: When Worlds Collide
- CUBA: Preparing for Perestroika
- Silver: A Dash for Allocated?
| GoldSeek.com Radio Gold Nugget: Gerald Celente & Chris Waltzek Posted: 29 Mar 2011 07:02 PM PDT GoldSeek.com Radio Gold Nugget: Gerald Celente & Chris Waltzek
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| Could Peak Oil Reverse Globalization? Posted: 29 Mar 2011 06:50 PM PDT Yes, there are many alternative sources of energy, however, when it comes to transportation, either by truck, ship, or airplane, petroleum is still King. It is used well over 90% in the transportation of products in the global economy. Windmills and solar panels are not going to be pushing cargo ships across the Pacific anytime soon. Oil, as the largest component of global energy, also supports our monetary system. Think of oil as we think of interest rates. Low interest rates spur investments, just as cheap oil spurs economic growth. But it is not just the price that matters, but the direction of the trend. Just as a rising interest rate environment diverts money into non productive uses - the servicing of increased debt loads, so too do increasingly higher energy costs divert money to non productive uses. Higher oil also diverts money from industrialized nations to resource exporting nations. But it is also a very strategic resource that gives strength to the US Dollar, as the world's reserve currency. The use of oil is not going away anytime soon. However, the sources of cheap oil are diminishing. There is still plenty of oil out there - but it is located in the tar sands of Canada, or deepwater offshore. This oil is much more expensive to extract and process. And as political instability in the Middle East increases, so too does the price of the easy oil - conventional oil that does not need as much processing and literally gushes out of the ground like a fountain. Economist Jeff Rubin gave a speech to ASPO (Association for the Study of Peak Oil and Gas) last October. In it, he predicted triple digit oil prices within 10 months. Was he right for the wrong reasons? After all, he attributes the rising cost to diminished production of cheap conventional oil. I guess we'll know in another ten months? Nonetheless, he ends his speech on a rather optimistic note, very unlike many peak oil adherents. He sees an economic revival occurring in the US as it imports less and produces more for itself. However, he still warns us that an alternative transportation policy needs to be developed. Here is the presentation, the link that follows contains the transcript of the speech for those that prefer to read it. And an interesting quote on Oil costs and domestic industry, particularly the Steel Industry: Take the steel industry, for example. Just before the recent recession, some very curious things were happening in the US market. When oil prices got to be over $100 barrel, all of the sudden, Chinese steel exports to the US fell at double-digit rates. And all of the sudden, US steel production was up. And all of the sudden, US Steel Corp., which was one of the biggest dogs in the market, all of the sudden its share price doubled. What was going on? I'll tell you what was going on. For the first time in 20 years, it was cheaper to make steel in the United States than to import it from China. Why? Consider what China has to do to send you steel. First, it has to ship iron ore from Brazil, across the Pacific Ocean, turn it into steel, which is itself a very energy-intensive process, then ship it back, across the Pacific Ocean, to you. At $20 barrel, that works. At $100 barrel, that doesn't work. Transcript HERE 
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| Buying Silver and Avoiding the Sharks Posted: 29 Mar 2011 06:02 PM PDT I keep pounding, pounding, pounding the table that silver is the biggest bargain out there, for, at last count, a jillion reasons, and that anybody who does not buy silver Right Freaking Now (RFN) is making the mistake of a lifetime, and the family is all, like, "Will you please stop pounding the table? It is irritating and is making things spill, aside from the fact that we don't have any money with which to buy silver, and you know that!" which devolved into a lengthy discussion about who among them was the most irritated with me and everything I say or do.
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| Utah: Forget dollars. How about gold? Posted: 29 Mar 2011 04:49 PM PDT Gather 'round, gold standard enthusiasts. There is a new law in the state of Utah that might be of interest. The Beehive State has a new measure on the books that eliminates state taxes on the exchange of gold and silver coins and directs the legislature to study an "alternative form of legal tender." The law, signed by Gov. Gary Herbert last week, also recognizes gold and silver coins issued by the federal government as legal tender in the state. Of course, they already are. But people use them as investments, not pocket change. The big legal change in Utah is that the state tax code now treats gold and silver coins -- issued by the U.S. Mint -- as currency rather than an asset. That means no capital gains or other state taxes will be levied when the coins are exchanged. 
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| Gold Seeker Closing Report: Gold and Silver End Slightly Lower Posted: 29 Mar 2011 04:00 PM PDT Gold fell $9 to $1410.70 in London before it surged back higher in New York and climbed to as high as $1423.21 by about noon EST, but it then fell back off in afternoon trade and ended with a loss of 0.23%. Silver dropped 60 cents to $36.46 before it also rallied back higher in New York and climbed to as high as $37.188 by midday, but it then slipped back off in late trade and ended with a loss of 0.35%.
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| TEPCO Stock Implodes As Radioactive Iodine In Fukushima Seawater Now 3,355 Above Limit Posted: 29 Mar 2011 03:09 PM PDT
Following the full day trading halt yesterday, a soon to be nationalized TEPCO decided to reopen. Instead it should not have passed go and gone straight to prison. The stock crashed 21% from yesterday's closing tick immediately at the open, 35% from Monday's close, and 79% in under three weeks. To all the major holders (which just happen to be Japan's largest insurance companies as disclosed previously) our condolences.
And while TEPCO continues to be the only shining beacon of the complete uncontrolled collapse of the rescue efforts in Fukushima, with global markets now having moved on, here are the latest and greatest headlines out of the worst radioactive disaster since Chernobyl:
And the latest news from Asahi, which is precisely as we predicted from the very beginning: "giant shrould mulled over Fukushima 1 to cut radiation leak." Now if only here was a shroud for all the radioactive lava and seeping subsoil water radiation...
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| Posted: 29 Mar 2011 12:50 PM PDT View the original post at jsmineset.com... March 29, 2011 12:45 PM My Dear Friends, The paper gold market is not the gold market. As in the 1970s, cash will rule the ultimate price. Gold's involvement in a new virtual world currency will sustain 80% of that high price. In the 1970s paper gold was a short term game and influence on price. Today paper gold has been just that. Greg's article posted the other day has reviewed what you must realize by now. Pay no attention to the games the gold banks are playing. That is for their short term benefit. Gold will trade at $1650 before it goes much higher. Regards, Jim Jim Sinclair's Commentary There are initiatives within the legal structure of mortgage making and packaging that could have a colossal impact on those holding these commitments. Shiller today said that inflation adjusted economic statistics are clearly in the double dip. The legalities concerning real estate commitments may well be the cartalyst that take...
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| Hourly Action In Gold From Trader Dan Posted: 29 Mar 2011 12:50 PM PDT View the original post at jsmineset.com... March 29, 2011 11:01 AM Dear CIGAs, Click chart to enlarge in PDF format with commentary from Trader Dan Norcini For further market analysis and commentary, please see Trader Dan's website at www.traderdan.net ...
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| Posted: 29 Mar 2011 12:50 PM PDT View the original post at jsmineset.com... March 29, 2011 10:54 AM Real Estate Far Worse Than Advertised CIGA Eric Falling home prices represents a classic illustration to the old saying, adding insult to injury. Home prices despite on going currency devaluation continue to fall in most major US cities. In other words, the headlines 'slant', even the more realistic ones, tend understate the severity of the housing problem. This suggests another old expression, "far worse than advertised." U.S. Median Home Price (MHP) And MHP to Gold Ratio: Headline: Home prices falling in most major US cities Home prices are falling in most major U.S. cities, and the average prices in four of them are at their lowest point in 11 years. Analysts expect further prices declines in most cities in the coming months. The Standard & Poor’s/Case-Shiller 20-city index released Tuesday shows price declines in 19 cities from December to January. Eleven of them are at their lowest level sinc...
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| Bix Weir: World Gold Council supports gold price manipulation Posted: 29 Mar 2011 12:36 PM PDT 8:35p ET Tuesday, March 29, 2011 Dear Friend of GATA and Gold: Bix Weir of the Road to Roota letter tonight takes note of the World Gold Council's opposition to position limits in gold and silver trading in the U.S. futures markets. Weir's commentary is headlined "World Gold Council Supports Gold Price Manipulation" and you can find it here: http://www.roadtoroota.com/public/564.cfm CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Prophecy Resource Spins Off Platinum/Palladium Venture: Company Press Release, January 18, 2011 VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy. PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding. Following the transaction: -- Prophecy will own approximately 90 percent of PCNC. -- PCNC will consolidate its share capital on a 10 old for one new basis. -- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp. -- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings. Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000. For the complete announcement, please visit: http://prophecyresource.com/news_2011_jan18.php Join GATA here: An Evening with Bill Murphy and James Turk https://www.amsterdamgold.eu/gata/index.asp?BiD=12 Or a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf
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| Simon Black On Another Form Of Inflation Posted: 29 Mar 2011 11:33 AM PDT
From Simon Black of Sovereign Man Another Form of Inflation Sticker shock in grocery store checkout lines and gas pumps around the western world is starting to set in. At this point, you have to be living under a rock to not notice that prices of goods and services around the world are increasing substantially.
As corporate profit tax schemes go, this is incredibly low. A company with roughly $400,000 (USD) in profits would have an effective tax rate of just 8%, and a company with $1 million (USD) in profits would pay an effective tax rate of just 13.5%.
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| Comprehensive First Quarter FX Outlook From GTAA Posted: 29 Mar 2011 11:14 AM PDT
Following the relase of its general equity market overview, GTAA has followed up by releasing the quarterly FX market analysis. In a nutshell, Cleusix sees the USD as the fulcrum security with substantial upside (we would agree...if Bernanke were to not pursue further debt monetization). "The USD is becoming increasingly undervalued against most currencies. It is at a 40 years low on a real broad trade-weighted basis. Sentiment is increasingly supportive for the USD. Speculators had their biggest USD net short position ever a week ago and have covered a third despite continued USD weakness (a positive divergence. Assets in the the Rydex Weakening Dollar have surpassed assets in the Rydex Strengthening Dollar fund but have yet to spike briefly higher as they usually do when the USD decline exhausts itself. There is a big global short USD position which is growing by the day as the increase in foreign central bank reserves can not be completely explained by their current account balance and the net foreign direct investments. Hot money is flowing to emerging markets and we are on the look out for canaries…" All this and much more in the full 56-page report enclosed. Key Highlights:
Full report:
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| A Close Below $1,392 Sends the Gold Price Tumbling Posted: 29 Mar 2011 11:01 AM PDT Gold Price Close Today : 1416.20 Change : (3.70) or -0.3% Silver Price Close Today : 36.984 Change : 10.1 cents or -0.3% Gold Silver Ratio Today : 38.29 Change : 0.005 or 0.0% Silver Gold Ratio Today : 0.02611 Change : -0.000003 or 0.0% Platinum Price Close Today : 1742.70 Change : -2.80 or -0.2% Palladium Price Close Today : 752.65 Change : 8.35 or 1.1% S&P 500 : 1,319.44 Change : 9.25 or 0.7% Dow In GOLD$ : $179.23 Change : $ 1.67 or 0.9% Dow in GOLD oz : 8.670 Change : 0.081 or 0.9% Dow in SILVER oz : 332.01 Change : 2.20 or 0.7% Dow Industrial : 12,279.01 Change : 81.13 or 0.7% US Dollar Index : 76.17 Change : 0.044 or 0.1% When I was a kid I never could figure out why we had to wash dishes and make up beds. After all, it was a foregone conclusion we were going to dirty the dishes and mess up the beds again, shortly, right? So why keep washing and making up? Now that I have lasted 63 years, I don't ask that question any longer. That also explains why we follow a market trend until it changes. Yes, yes, every rise will be followed by a corrective fall. That's a foregone conclusion, BUT it hasn't happened yet, so go with the trend. Thus with trembling I look at the frantic SILVER and GOLD markets, knowing someday they will correct, but I am not going to fight the trend. Ho-hum, the GOLD PRICE corrected a bit today, but without any meaningful action. Yesterday's low was a smudge above $1,410, as was today's. That's strong action at support, provided gold doesn't return for another visit. Up above that $1,425 level has gold pinned in again, so it needs to smash that gate tomorrow. Comex closed down $3.70 at $1,416.20. Trading now at $1,419.15. As long as gold refuses to be driven below $1,405, maybe $1,392 in a pinch, it threatens no significant correction. A close below $1,392 sends the gold price tumbling. The SILVER PRICE appears a mite iffy today, but -- listen to this -- the gold/silver ratio made another new low today at 38.292. Try to wrap your brain around this: silver and gold both dipped, but gold dipped enough more that the ratio dropped. Ratio has now passed the 100 year average and is plunging toward the 200 year average. Five day chart reveals silver blocked by 3720c, but supported by 3640c. There's the range, and to move silver must break out of it one day or another. Comex silver gave up 10.1c to 3698.4c. If silver and gold intend to move higher -- and my guess is that the will -- then they'll have to do it soon since a high in May or April is seasonally their last chance before October. No cosmic law decrees they can't top in June - September, but twould be a giant anomaly. I return to my concern voiced a few days ago: why the strength in metals and stocks? What does the market know? Why does silver keep on pushing to new highs by 2 or 3%? None of this suggests a calm and prosperous future for the dollar or the world economy. That scrofulous US Dollar index has climbed off its 75.25 low six days ago up to its 20 day moving average, (76.28), first tripwire of a possible upturn. Today the dollar added a nearly invisible 4.4 basis points and is trading at 76.172, but look on the bright side: it's not below 76. The scrofulous euro gained 0.16% today for a 1.4106 close. It has been pushed back from its late peak nearly to its 20 dma (1.4018). That gap it left nine days past has now been filled, leaving the stench of an exhaustion gap in the air. The yen has left two gaps in the last two days as it plunged beneath its 20 and 50 day MAs toward a range where all the world's Nice Government Men will feel comfortable again. Yen not trading at 82.45Y/$ (121.285c/100 yen). In its own tortuous (?tortious) way the dollar seems to be slowly bottoming. For all those naïve souls who believe that Comrade Bernanke has lost control of the dollar, I must prick your bubble. Exchange rates are ALL manipulated. If the buck is headed down, as it has been since July 2001 when last it touched 121, there is a reason: the government and Fed decided to let it depreciate. Wake up, mushrooms! Those two are NOT your friends. My-yo-my, stocks caught a wave again today. Dow floated up 81.13 points to 12,279.01 while the S&P500 fattened by 9.25 to 1,319.44. Last three days stocks have kept bumping against 12,275. February high was 12,391.29 (S&P500 - 1,344.07), and nothing happens until that is beaten. Don't count on it, but you can always wait for that while you're waiting for the Easter Bunny, Santa Claus, and the Honest Politician. Wow, talk about conflicted! Stocks are a sham, but silver tends to outperform gold while stocks are strong. Who do I root for in that game? MILESTONES OF AMERICAN CULTURE: On this day in 1884 John Pemberton introduced Coca-Cola in Atlanta. Since Pemberton was looking for a cure for his morphine addiction after being wounded as a Confederate soldier, the company's later denials that the concoction never really contained cocaine seem somewhat fanciful. Never mind, give it to 'em, but in those days narcotics were available at all drugstores, as in some countries today still, and you could buy laudanum (tincture of opium) over the counter. Pemberton made numerous health claims for his product, and said it was "delicious, refreshing, exhilarating, invigorating" and "a valuable brain tonic." Depending on what was in it, I reckon so. Nowadays you don't have to worry about any narcotics in soft drinks, because the high fructose corn syrup will kill you far quicker and less kindly than cocaine. Worse yet are the artificial sweeteners, some of which metabolize to formaldehyde in your body. Both HFCS and artificial sweeteners operate the same way on your body: they make you hungrier. If you are fighting a weight problem, you don't want to get any closer to a soft drink than a bloodhound would come to a skunk. I'd just as soon drink a big glass of milk mixed with cat hair and lard. On this day in 1867 the Dominion of Canada was created by the British North America Act. Confederate Secretary of State, Judah P. Benjamin, fled after the War to England where be became a barrister and Queen's Counsel. I have read but cannot now footnote that Benjamin's advice on that the Act helped guide it toward federalism, such as the United States union was until converted by the genocide revolutionary Lincoln into a monolithic unitary state. The monthly Moneychanger newsletter for March 2011 has been posted to www.the-moneychanger.com, where paid subscribers can pick it up. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger The-MoneyChanger.com © 2011, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down. Whenever I write "Stay out of stocks" readers inevitably ask, "Do you mean precious metals mining stocks, too?" No, I don't. 
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| Robin Griffiths - $8,000 Gold is Not Unreasonable Posted: 29 Mar 2011 10:49 AM PDT  With gold still consolidating above $1,400, today King World News interviewed one of the top strategists in the world Robin Griffiths. When asked about gold Griffiths responded, "Most western economies can't get what Lord Keynes said about gold out of their head, he said it was a barbarous relic. And in our western culture it still is a barbarous relic, but we're moving into a world where the cultures of China and India are going to be more dominant and they are the engine of the world's growth. And in their culture, gold is real money, has been for thousands of years and will be in the future."
This posting includes an audio/video/photo media file: Download Now |
| Rising prices will not deter gold sales Posted: 29 Mar 2011 10:40 AM PDT by Sutanuka Ghosal, Pk Krishna-Kumar & Madhvi Sally Jewellers say buyers have been investing more in the yellow metal to cash in on the uptrend in prices. … Reports say India imported over 900 tonne of gold in 2010 as consumers expected prices to climb further. … "The consumer knows that prices are bound to remain firm and hence there is no impact on the shopping. We expect sales to pick up in April," said Akhil Jain, owner of Chandigarh-based Nikka Mal Babu Ram Jewellery Arcade. [source]
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| Unmanipulated US "Misery Index" Hits All Time High Posted: 29 Mar 2011 10:08 AM PDT
While everyone knows that the CPI in the US is manipulated beyond repair (a topic far too broad to be discussed here suffice to say that as disclosed previously true inflation in the US is currently runrating at over 8%), inflation as actually represented by US consumers and reported by Zero Hedge earlier, in the form of the 1 year inflation expectation index of the Conference Board lack of confidence index, is near all time highs. So if one takes this data series and adds to it the narrow unemployment definition (U3) one would get an adjusted Misery Index for US citizens (using inflation expectations instead of manipulated CPI). As the chart below shows, the Misery Index, which is merely inflation plus unemployment, constructed as such, would now be at an all time high. Hardly in keeping with Bernanke's wealth effect prerogative, but surely in line with record food stamp usage reported month after month. That said, the silver lining to that particular mushroom cloud is our confidence that as the bulk of Americans live in record "misery", they will be comforted to know that their 20 shares of NFLX are trading at a four digit EPS multiple. And the other good news is that we have the Brits beat again: whereas the US is at a record, the UK is merely at a 20 year high, proving once again that only the US never does anything half-assed.
h/t John Lohman
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| Posted: 29 Mar 2011 09:19 AM PDT by Addison Wiggin – March 29, 2011
0:00 — How's this for an unpredictable consequences of the disaster in Japan? The United States may not get to wear the mantle "world's highest corporate income tax" after all. Bummer. At the current pace, the U.S. will ascend to No. 1 next month, as Japan cuts its rate from 40% to 35%. But last week, following the disaster, Japan's economics minister suggested the government might reconsider. He's concerned the government will suffer a short-term revenue hit in the midst of rebuilding. Japan is a fiscal basket case. The Nipponese government debt-to-GDP ratio is a whopping 225%. Compared to that to the American version… near 100%. If we ran a business in Japan right now, we'd be looking forward to having lower taxes and higher operating capital. We probably wouldn't like it too much if the rug was pulled from under us at the last minute, earthquake or no. 0:20 — Having said that, we're not running a business in Japan, are we? We've got the U.S. government to contend with. And the trend in place in this country is what we're concerned with… "We are dealing with a tax system that is a dinosaur," Cisco CEO John Chambers said of the U.S. system on 60 Minutes Sunday, helping to highlight our concern. We first noted the trend last year when David Farr, CEO of Emerson, said because of the uncertain business environment in the U.S. he was going to ship all of his new jobs overseas. The potential exodus is also a central theme of the documentary we're filming right now. Cisco has been expanding overseas in recent years, too… and keeping its average tax rate over the last three years to 20%. "We do what makes sense to the shareholders," Chambers told Lesley Stahl. "We go where there are incentives in countries that say, 'We want you here, we're going to give you tax advantages, and we want you to add jobs here, etc.' "We can no longer in America say, 'This is how we do it; therefore. you must do it.' [The U.S. has] gotta change, or we're going to be left behind." 0:37 — "If you have a 35% rate in the United States and, for example, a 12.5% rate in Ireland, there's a incentive to move your factory to Ireland," economist Martin Sullivan added. The 60 Minutes story pointed out 600 U.S. companies are in Ireland, employing 100,000 people. "The U.S. Treasury, in effect, is subsidizing investment in Ireland," Sullivan said. Cisco has eight subsidiaries in Ireland. 0:41 — Of course, there are shades of gray in all this. As high as U.S. corporate tax rates are, there are plenty of "loopholes" buried within the 71,684 pages of the tax code. That's how General Electric paid $0 in U.S. corporate income tax despite earning $5.2 billion in domestic revenue. We might cheer GE's tax-reduction efforts if it weren't joined at the hip to Uncle Sam. GE secures boatloads of defense contracts. Its finance arm, GE Capital, got $139 billion in federal loan guarantees in during the Panic of 2008. 0:48 — There are other examples. Sen. Bernie Sanders, the self-described socialist, put out a list of 10 corporate giants that pay little or no income tax. With one exception, Carnival Cruise Lines, all 10 fall into three broad categories.
So if you want to avoid corporate income taxes, the lesson is to either become an integral part of the government… or employ a massive lobbying force to secure favors for your industry. That's a terrible lesson for the rest of us. For Cisco's John Chambers, the take-away is that he's better off casting his lot overseas. It's a shame, but we can hardly blame him. If capital goes where it's treated best, for many companies, the United States isn't currently the place. 0:55 — Thus, the crucial question of the age: Fight or Flight. Assuming you're not joined at the hip to Uncle Sam and get invited to regular lunches at the White House like GE's Jeff Immelt, what do you do? Do you stay home and "fight"? Do you persist in your efforts to create wealth, despite the government's and the grifters' best efforts to destroy it? Or do you "flee" and take your capital where it's… well, treated better? That's the core question we'll pose this coming July — just four months from now — at the 12th annual Agora Financial Investment Symposium in Vancouver. We'll be joined by familiar cantankerousness from Doug Casey… who's chosen the "fleeing" option by living in 12 countries during his adult life… and new ideas from Gary Shapiro, author of the book The Comeback, who'll be arguing that innovation will restore the American Dream. We've invited crowd favorites Marcio Mello, Juan Enriquez and Barry Ritholtz to come back too. Along with the whole list of "usual suspects." (You'll even be invited to view and comment on the film in progress…) Check out the current list of speakers… and we're adding new ones every day… right here. If you'd like to sign up, discounted registration is still available. Or call Barb Perriello at (800) 926-6575 and tell her Addison wants you to be there… you. 1:16 — For the third time in a week, a gauge of consumer confidence has turned in a spectacularly gloomy number. Today it's the Conference Board's turn; its index for March took the biggest one-month hit in a year. As with the Bloomberg and Reuters/University of Michigan surveys last week, consumer mood is being dragged down by higher food and fuel prices. The Conference Board's chief economist, really sticking her neck out, says this "will likely impact spending decisions." 1:23 — Here's another data point that's turned in its worst one-month performance in a year: the Case-Shiller home price index. The 20-city gauge fell 3.1% between January and February. "The housing market recession is not yet over," in another neck-extending statement, this one from the head of the committee at S&P that crunches the numbers. As you can see, the 20-city number is at a critical juncture… because it's its late 2008 lows.  Prices have fallen in 18 of the 20 cities over the last 12 months. They're essentially flat in San Diego, and up 3.6% in the Belly of the Beast — Washington, D.C. 1:00 — Stock traders have sloughed off the day's data, and the major indexes are up slightly as we write. 1:04 — "This week will see a lot of data releases that will cause anxiety and uncertainty in price direction," writes our currency trading expert Abe Cofnas. "On Friday, we'll have the Bureau of Labor Statistics' monthly nonfarm payroll numbers, a market-moving U.S. economic indicator. And Thursday will see the Tankan report, a massive quarterly survey of 10,000 Japanese manufacturing firms. Yen traders be on alert for any surprises there. "We'll also have speeches from several U.S. central bankers that have the potential to cause ripples as traders listen closely for any references to inflation risks and the end of quantitative easing, or QE2. "In fact, I saw a fairly new phrase emerging from Internet market chatter —'normalization.' That reference is to end of QE2. It's important because the end of easing provides fuel for the 'hawks' supporting tighter rates. It's also dollar positive. This new wrinkle in the sentiment wars will be interesting. "Of course, the situations in Japan and Libya remain forces on market sentiment, as well. All this presents a rich context for shaping binary option opportunities." Yesterday, Abe's readers laid on two currency trades, playing a market covered by no other North American trading advisory. As with all trades in this market, the results will be known by Friday. Some of them play out even sooner. Readers have already collected gains of 369%, 545% and even 1,339%. Let Abe walk you through how it works right here. 1:46 — Precious metals are down fractionally from where they were 24 hours ago. Spot gold is fetching $1,419 and silver has dropped a couple of pennies below $37. 1:50 — Crude oil has added a few cents, pushing back above $104. 2:17 — Has the venture capital scene really come to this? The setting: the Venture Capital Fundraising Club of Silicon Valley, a reality show in which you get to make a five-minute presentation to at least two judges — real venture capitalists, or CEOs of VC companies or startup lawyers. Rachel Sequoia was the "Audience Choice" winner in February. This child of the earth proposed she be given $500,000 for a venture called "Share the Air." What Perrier and Fiji did for bottled water, Sequoia would do for air — capture it in exotic places, bottle it up and sell it to "plants, animals and people." But Rachel is far more, like, eloquent in her visions than we could ever be…  Duude, were these VCs, like, "getting punked"… or I don't know… something else? Either way, this is potentially the most annoying video ever. 2:48 — "Do the Feds really not see," writes a reader, preaching to the choir after yesterday's issue, "that the 'significant strength and momentum' in the economy is the same smoke and mirrors as the 'stock prices rose and… interest rates fell,' not because things are getting better, but because the Feds are distorting reality? "And what do they think is gonna happen once they start to tighten? I can't believe these guys are such morons. Prime examples of government employees…" The 5: We had this very discussion yesterday while writing The 5. We try to take them at face value. They appear to have the hubris to believe they can pull a lever here, push a button there and control the entire global economy. As investors, we assemble evidence to the contrary and place our bets accordingly. 3:42 — "Mr. Ben four times a year," adds another reader, commenting on the Fed's announcement they'll be giving quarterly press conferences. "Now we can get the expected answer in quadruple form. "So when would Mr. Bernanke say anything that would be true? He would only answer and present what people want to hear. "QE to infinity! With all the mortgages on the books, good or bad, as those are rolled over, they will continue to convert the incoming cash to Treasury purchases? It's sleight of hand. The crappy assets will be turned over through refinance, short sales and foreclosures to finance the U.S. government. "We paid for them once, and then we will pay for them again. Am I wrong? Am I seeing this clearly? Probably not, because it is behind the curtain…" The 5: Bernanke's first news conference comes at the end of next month. We're not sure how useful they will be in pulling back the curtain, but we are very confident they'll be confusing and entertaining at the same time. Stay tuned. 4:08 — "I'll provide the link," a reader extends a generous offer to a fellow reader, "to the appropriate chapter of Economics in One Lesson to show what a shortsighted and counterproductive position his is." Ah, yes… the reader yesterday suggested that "Large and ongoing U.S. military expenditures are actually an indirect form of societal welfare," and as a result, bringing the troops home from their assorted overseas obligations would bring about massive unemployment. "But given the absurdity of supporting military expenditures," our reader cautions, "and destruction as 'productive welfare,' he should really read the entire book." 4:33 — "The reader who wrote about all the displaced people we would have if we stopped aggression overseas," another agrees, "have no fear! There are plenty of jobs here. I submit for your consideration:  A Florida Fish and Wildlife officer using a twin-engine Vulcanair to spot a crack smoker in the woods from 7,500 feet. "One might marvel at the technology, or one might marvel at the endless resources our government can employ to spy upon us. How much freakin' money did we spend to go find that one loser off in the freakin' jungle? " "Aren't there enough drug kingpins selling drugs to kindergarteners that we have to search out the wilderness? "No, to answer your unasked question, I have never even smoked pot. But I still don't give a damn if you use it. But yes, I do partake of adult beverages. "Really enjoy The 5. I like to think I'd get along with your readers famously." The 5: Why not try it out… about a thousand readers will be assembled again this year at our Symposium in Vancouver from July 26-29, 2011. Our theme, to get you interested, is Fight or Flight: Capital at Risk! We'll be hosting speakers and attendees from 29 countries and all seven continents. We, too, believe you'll get along with the group famously… Vancouver is a sight to behold each year. (If you want to know how we have attendees from Antarctica, you'll just have to call Barb Perriello at (800) 926-6575… and book your early-bird discounted seat, today.) 5:00 — "I'm a fairly new subscriber with you. And I want to say how much I appreciate your 5 Min. Forecast. Though I am not really into finance, and therefore don't understand some of it, there is enough to help keep a novice interested. Thanks." The 5: Welcome. Thank you… for giving us a try. We hope you continue to like what you see. Cheers, Addison Wiggin The 5 Min. Forecast P.S. Hmnn… Time magazine's website today presents a slideshow of photographs from the 1923 hyperinflation in Weimar Germany…  If you want to stay ahead of what your friends will be talking about at your next backyard barbecue, the book When Money Dies will help you dazzle them with factoids. The book is a gripping account of what it felt like for ordinary citizens when the German government tried to print their way out of war debt incurred by World War I. Written by the British journalist Adam Fergusson and published in 1975, it became an underground classic in the last decade, with used copies going on Amazon for hundreds of dollars. Now it's back in print, and we're making it as easy as possible for you to get a copy… In fact, we'll even give you access to Chris Mayer's monthly letter Capital & Crisis for a 30-day trial. All we ask is that you cover shipping for the book. The full scoop on this offer is here. P.P.S. All books you read about here in The 5 are available at Laissez Faire Books for a 20% loyal-reader discount.
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| Tennessee Considering Alternate Currency Posted: 29 Mar 2011 09:04 AM PDT The Federal Reserve got another "no confidence" vote of sorts from another state in the union, this time Tennessee, where the legislature joins a host of other lawmaking bodies outside of the nation's capital in considering alternatives to the U.S. Dollar, according to this report in The New American, just in case the central bank collapses.
Utah's gold and silver as legal tender law awaits the governor's signature as Tennessee joins Colorado, Montana, Missouri, Indiana, Iowa, New Hampshire, Oklahoma, Tennessee, Vermont, Georgia, and Washington in considering similar legislation. South Carolina and Virginia have both passed their own versions of new legal tender laws.
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| Jim Sinclair: We are Way Over the Edge Already! Got Gold? Posted: 29 Mar 2011 09:00 AM PDT It is the Currency That Breaks, Not the Country’s Economy!* I wrote a piece recently on the U.S. economy*called “Could America be Pushed over the Economic Edge?” about how Libya, Japan or even covert economic warfare from America's enemies could push the U.S. economy into another financial meltdown. *I received a one sentence email from my friend Jim Sinclair that said, "We are way over the edge right now." His message*gave me a sinking feeling. [Let me explain.]*Words: 923 So*says*Greg Hunter*([url]www.USAWatchdog.com[/url])*in*an article* which Lorimer Wilson, editor of www.munKNEE.com, has further edited ([* ]), abridged (…) and*reformatted*below for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.)*Hunter goes*on to say: Mr. Sinclair is a world renowned gold expert, but in order to trade that market, you must be extremely knowledgeable in ...
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| Posted: 29 Mar 2011 08:48 AM PDT By Jordan Roy Byrne Point: "Gold is a crowded trade and a bubble." First of all, ignore anyone who calls Gold a trade. It's a bull market not a trade. A trade makes it sound like it is a fad and aberration. Yes, there will be wild swings both ways but the global allocation to Gold and gold shares is 1%. Its estimated that the allocation to Gold and gold shares in pension funds is 0.3%. Does that sound like a bubble? Not even close. Good God, can you imagine if that figure went to 5%? Point: "You can't eat Gold." I didn't know the US Dollar had any nutritional value. [source]
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| Warning Signals for Gold Investors Posted: 29 Mar 2011 08:47 AM PDT Precious metals market, gold in particular, has been highly influenced by economic indicators and currency market, historically. In our previous essay entitled No Breakout in Gold So Far, Strong Resistance Seen in Silver ... Read More...
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| Gold ends modestly lower, extends losing streak Posted: 29 Mar 2011 08:34 AM PDT By Claudia Assis and Virginia Harrison Gold for June delivery, the most active contract, fell $3.80, or 0.3%, to $1,417.50 an ounce on the Comex division of the New York Mercantile Exchange. That was gold's lowest settlement since March 18. It had traded as low as $1,412.10 an ounce earlier, but prices came off lows as a key gauge of consumer confidence fell sharply in March. A report from the nonprofit Conference Board pointed to rising prices of food and energy as the main source of worries for U.S. consumers. … "Investors are clearly still taking profits after the price of gold marked a new record high last week," Commerzbank analysts said in a note. "The fall in price yesterday was accompanied by outflows from gold [exchange-traded funds]," they said. … Japan struggled to contain radiation leaks at its crippled Fukushima Daiichi power plant, with plutonium found in soil near the plant. Prime Minister Naoto Kan said the government was on "maximum alert" and called the situation at the plant "unpredictable." … Fears of currency debasement and loose monetary policy are top reasons for gold's decades-long bull market. [source]
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| Rare Earth Stocks Breaking Out Posted: 29 Mar 2011 08:17 AM PDT (This is an excerpt of what was sent to premium readers over the past several days.) Not too long ago in our national history, mining for rare earths (Market Vectors Rare Earth/Strategic Metals (REMX)) was an American enterprise. As in so many other areas, such as nuclear power, automobiles and technolgoy, it was decided that the US would shut down industries and farm the work out. The Chinese took the lead and became the world's supplier of over 97% of these crucial rare earth elements. Now it is the Americans coming, hat in hand, to petition Beijing a la Oliver Twist with a "Please… may I have some more?" Consequently, it is an exciting time for people positioned to profit from the most promising stocks in the rare earth market. Demand is soaring skyward in the face of a serious shortage. An immediate global call for action and solution is required. It's already too late. The prices of rare earths are reaching new heights. This swift ascension is all the more notable as China increasingly curtails the exports of these rare ores. Now Beijing has revised downward by 50% what they would allow for sale abroad, in the January to June 2011 period. China has also raised taxes and has cut down on illegal smugglers. It is a game of chess and China is forcing the West to make the next call. Will the West develop their rare earth assets? If the West doesn't, I expect the Chinese will make an acquisition. Already Molycorp (MCP) is on the record that China may import certain heavy rare earths and may look for targets abroad. China would be making a strong case that even they are strapped for critical heavy rare earths such as dysprosium and neodymium. Such regulation of this critical area continues to stoke profitable activity in this sector. It is well known that rare earths are essential to this vital modern industrial nation. For example, Japan, the world's third-largest economy, depends on rare earths, especially their top-notch automobile maker such as Honda (HMC) and Toyota (TM). Lanthanum is used in their batteries, cerium is in the windshields, dysprosium and neodymium are used in the hybrid engines. These hybrid vehicles are large users of rare earths. Car companies are increasing the amount of rare earths used to raise the fuel efficiency of the newer designs. Recently China claimed that they had to place quotas to protect their own industries and environment. China professes they had to exercise self-protection and were not being draconian. In essence, they advised other nations to expedite their own mining permitting processes so that new prospects could be brought to fast-track fruition. These actions are not without repercussions. Several US senators threaten to bar Chinese miners from the United States unless they can increase rare earth supplies abroad. Importantly, the World Trade Organization is mobilizing to exert pressure on China to increase their exports through trade sanctions. There is also legislation pending to require the American military to stockpile rare earths. Concerted global action is required that goes beyond protectionism. Governments must accelerate the entire permitting and financing process. Such a combined effort is immediately called for. Many of my rare earth recommendations have huge potential and should be followed as I expect many of these heavy rare assets to gain significantly. Last week, I sent out a report showing increased institutional interest in rare earth stocks as the crisis intensifies in Washington and Beijing. Recently rare earths moved from a rapidly rising market at the end of 2010 to a sideways consolidation so far in 2011. Some fear the US will retaliate against China by forcing the WTO to threaten trade sanctions. The profit-taking appears to be coming to an end and there is a lot of money flowing back into this space. I sent out last week an update on the break of the 50 day moving average and falling wedge to the upside in Molycorp. Molycorp is the leading light rare earth developer in the Western Hemisphere and I believe that this enthusiasm will spread to the other rare earths as this sector looks ready to take off again. This appears to have similar characteristics as the breakout in December where the rare earth sector soared on export cuts from the Chinese. Right before the December breakout many of the rare earths showed similar technical characteristics with a break of the 50-day moving average followed by a reversal higher. The fact remains that both the US and China realize that they need each other. The US has provided China with a large market and China has afforded the US cheap labor and cheap rare earth commodities, which is crucial to the latest and most innovative technology products. Recently, China and the US had a special dinner announcing a myriad of deals across several industries. The theme of the deals was that China would help devalue the dollar to keep up the equity markets if the country could have access to North American resources and financial companies. China needs to hedge their large positions in the US dollar (PowerShares DB US Dollar Index Bullish (UUP)) and long-term US debt (iShares Barclays 20+ Year Treas Bond (TLT)). China has opened an office in Toronto to look for acquisitions and is encouraging investments in commodities to supply the rapidly developing Chinese market. Molycorp recently announced that China may be looking for rare earth targets and may be an importer by 2015. China announced yesterday that a rare earth tax will be imposed. This will significantly elevate production costs for companies operating in China. There is significant pressure being put on lawmakers in Washington on developing a domestic supply of rare earths. The rare earth sector is experiencing an explosion of investment interest as China continues to place restrictions and raise taxes on Rare Earth Oxides (REO), causing soaring prices. Sojitz, a major Japanese trading giant, has already made a deal with Lynas and Hitachi (HIT) and Sumimoto (SMFG) has signed agreements with Molycorp, the only near-term producer outside China. Japan and South Korea invested $1.8 billion in a Brazilian mining group a few weeks ago that is the largest producer of niobium. (Niobium is used to make a hard, lightweight steel that is increasingly being used to make vehicles that are lighter and more fuel-efficient.) I believe as the crisis intensifies there may be more strategic acquisitions for assets whose projects will come online further down the road. Companies in North America with the crucial heavy rare earth assets should be followed. Many do not realize that even China may make bids in 2011 on heavy rare earth assets. Stay tuned. If you need to stay on top of these situations with timely morning updates and video alerts…click here for a free 30 day trial.
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| Gold Daily and Silver Weekly Chart Posted: 29 Mar 2011 08:11 AM PDT |
| Posted: 29 Mar 2011 07:58 AM PDT syndicate: 0 Synopsis: 18 days after the Japanese earthquake and subsequent Fukushima incident, where do we currently stand… and what are the probable implications for nuclear energy, uranium prices and uranium stocks? The Casey Energy team takes stock of the situation. Also in this edition: The mathematics of economic thought, and a glance at China's ghost cities. Dear Reader, In the Daily Dispatch, I often discuss what's on Bernanke's mind. However, to a large extent, I'm simplifying his real thoughts. With Keynesian economics, it's always easier to discuss the philosophical aspects than the very specific underpinnings. On the one hand, I want to share more knowledge on the subject, but on the other hand, no one wants to read a math journal. However, I did think of a way to bring the point across. Most of us have never peered inside an advanced economics textbook in our lives. And yet, these textbook pages are what Ben Bernanke is thinking about. So, today, here's a glance at just two pages of the most mainstream macroeconomics textbook out there, Advanced Macroeconomics by David Romer. (David Romer is the husband of the now famed economist Christina Romer. Those two must have some interesting arguments over breakfast.)
The hieroglyphics above represent a model quantifying the effect of the savings rate on long-term growth. And this is just chapter 1, page 23. The book continues for another 616 pages. And yes, I've read it cover to cover – twice. Not only do I know a lot about Austrian economics, but I'm fairly well trained in Keynesian economics too – or, as I like to call it, the dark arts. Romer's Advanced Macroeconomics is assigned to almost every first-year PhD economics students in the country. At MIT, it's an undergraduate text. Now consider that Bernanke and other lovable characters such as Paul Krugman received their doctorate degrees from the very same math-intensive MIT program. So, when Ben Bernanke thinks about interest rates, unemployment and GDP, he isn't thinking about it like the regular guy on the street. He's trying to solve some ridiculous equation. These two pages are a small sample of how his mind works. His policies may seem bizarre at times, and that's due to the use of mathematics for his decision-making process. Most of us realize that printing piles of money isn't a particularly wise idea. However, Bernanke's equations tell him something different. In my opinion, utilizing mathematics to centrally plan an economy isn't a particularly intelligent idea. It only gives the illusion of understanding complexity. Unfortunately, the economics profession has long craved the respect of the sciences. Hence, economists futilely attempt to define social phenomena through mathematical approaches. Some of the cross-over is absolutely absurd. For example, many of the earlier economic growth models were based on ballistics theory. At the end of the day, economics just isn't physics. And those who apply ballistics theories to growth rates more often than not blow up the world – economically speaking. So, is there a use for this mathematical gibberish? Unfortunately, yes. As long as the MIT guys are at the helm, we're in their world. With an understanding of their formulas, one can guess the equations on their minds and the importance of certain variables. Hence, one can get a better picture of the Fed's actions in the short term. In my own analysis, I follow Austrian economics for my long-term views on the economy. But for the short term, it's actually more valuable to understand the ins and outs of Keynesian economics. That's the only way to dig into Bernanke's mind. Even my prediction in yesterday's Dispatch is influenced by this approach. Will Bernanke start discussing higher rates to boost the dollar? Believe it or not, there is an economic model quantifying whether a central banker should discuss higher rates. Now, I'm not going to base my prediction on a series of equations. But it's very useful to understand the hobgoblins that may be jumping around Bernanke's mind. Well, I hope this gave you some insight into the central banking process and didn't leave you even more confused. Now we'll get to some real science. The Casey Energy Team will update us on state of the Japanese reactors and the uranium market. Then I'll make a quick comment on China's ghost cities.
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| Diverging Silver Spot and Equity Prices Call for Caution Posted: 29 Mar 2011 07:55 AM PDT David Urban submits: Since its breakout in September of last year Silver has been on a tear - more than doubling from $18 per ounce to more than $37. In the last few weeks Silver has run into some headwinds, stalling its progress. As you can see from the chart below silver bullion is trading near the top of its range with prices breaking out to new highs, moving over $37 per ounce. (Click chart to expand) The top trend line is near the $38 per ounce area leaving little value for investors. Investors looking to go long silver bullion through ETFs should use caution at these levels. We may see a push through to $40 before a pullback takes place but long-term investors would be advised to exercise caution here as gold looks more attractive over the short-term time horizon. Add in the fall of the Canadian government and the Toronto Stock Complete Story »
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| Iamgold: Gold Stock With a Rare Earth Kicker Posted: 29 Mar 2011 07:52 AM PDT David Urban submits: IAMGOLD (IAG) is a mid-tier gold producer with geographically diversified operations in Africa, South America, and Canada, as well as a Niobium division. Niobium production comes from the Niobec mine in Quebec, which has been in operation since 1976. The Niobec mine is one of only three Niobium mines in the world continuing to produce high grades. Niobium is a mineral used in the manufacture of specialty steels like gas pipelines, jet engines, and superconductivity. For the fourth quarter of 2010, IAG recorded record attributable production of 315,000 ounces of gold at a cash cost of $574 per ounce. Attributable gold production for full year 2010 totaled 967,000 ounces at a cash cost of $574 per ounce. Revenues for 2010 increased to $1.167 billion, up 27.7% from $914 million a year ago. The bulk of the revenue gain came from an increase in gold prices, as production was only up Complete Story »
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| Rick Rule: When Worlds Collide Posted: 29 Mar 2011 07:34 AM PDT Source: The Gold Report 03/28/2011 Rick Rule, the renowned resource investor who founded Global Resource Investments, returned to cyberspace last week for a webcast in which he explored some of the implications for resource investors when two megatrends from opposite ends of the socioeconomic spectrum collide. This phenomenon will inevitably result in incredible market turbulence, Rick tells us, and, in the context of the ancient Chinese curse, some mighty interesting times. It was on a dark and stormy night in 1752 when Ben Franklin took his kite out to snag lightning from the sky and prove that it's a stream of electrified air. It led to his invention of the lightning rod as a means to protect people, buildings and ships against this dangerous force of nature. Ben's experiment took courage. It also took appreciation of what he was dealing with and wisdom enough to do it safely. In short, he was prepared—and his preparation paid off. Fast-forward 259 years. R...
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| CUBA: Preparing for Perestroika Posted: 29 Mar 2011 07:30 AM PDT Dividing Old Havana from Chinatown is Cuba's Capitolio Nacional, a monumental edifice with a fateful past. El Capitolio was conceived during the Roaring '20s, when the island led the world in sugar exports and the future seemed sky blue. President Gerardo Machado dreamed of turning Cuba into the Switzerland of the Americas. He decided that his 4 million countrymen needed a domed capitol building even taller and more ornate than the one he toured in Washington. So Cuba's Congress dutifully poured 3% of the country's GDP into their new home. (This would be akin to the US Congress spending $420 billion for a new office today, but let's not give them any ideas…) It took 8,000 skilled Cuban laborers just three years to complete El Capitolio, which featured gilt ceilings, a giant diamond embedded into the pristine marble floor and the world's third-largest indoor statue. However, the showy project couldn't have been more poorly timed. Work completed in 1929, just as America's stock market crashed and the Great Depression unfolded. The Smoot-Hawley tariffs crushed Cuban sugar prices by 74%. When El Capitolio's ribbon was cut in 1931, Cuba's economy lay in tatters. Machado was forced out of office, and his dream building would perform congressional service for only 28 years before Fidel Castro's revolutionaries swept into Havana and opted for more austere premises. I don't need to recite the history from here, which you probably well know. The winds of change are gathering in Cuba, though. Since Fidel Castro's health nearly failed in 2006, power has passed to his younger brother, Raul Castro. Raul has quietly reshuffled more than 30 cabinet members to prepare his party and people for a sweeping economic policy overhaul – Perestroika al Cubano. Even the semi-retired Fidel seems to have glumly accepted that change is inevitable, candidly admitting to a visiting US journalist that "the Cuban model doesn't even work for us anymore." The global economic crisis whacked Cuba hard. Venezuela cut back on its largesse as its own economy worsened. Tourism and remittances softened, while nickel export prices tanked. Furthermore, three severe hurricanes left a wake of destruction in 2008. Unable to service Cuba's estimated $21 billion foreign debt, and running out of generous leftist patrons to hit up, Raul Castro has, apparently, decided he has little choice but to pry open Cuba's economy. Castro's wild card is Cuba's oil and gas reserves. The island currently produces 60,000 bbl a day. But its US-facing northern waters hold an estimated 5-20 billion barrels of oil and 20 trillion cubic feet of natural gas. (Note: This compares with 29 billion barrels of oil reserves in the entire US.) Accessing this undersea oil requires the sophisticated drilling technology the US excels in. But as long as sanctions remain in place, the US oil majors are excluded from that bonanza. Amidst the applause of oil industry lobbyists, the dance for reengagement has begun, with both partners taking some unprecedented steps. Raul Castro has issued a far-reaching five-year road map for Cuba's future economic reform. The proposed changes would put Cuba on a very similar path to that taken by China in the 1980s and Vietnam in the 1990s. Here are some of the ideas: permit real estate transactions amongst Cubans, merge the two-tier currency system, close down inefficient state enterprises, decentralize state ownership, facilitate private ownership of businesses, distribute idle land to farmers, open state-owned wholesale markets and further encourage foreign investment – particularly in tourism. In recent months, some planned reforms have already been implemented in an effort to delay Cuba's impending insolvency. Costly subsidies on sugar and personal care products are being scaled back. The government announced plans to shed 500,000 state workers (that's 10% of the country's government work force in a country where 85% of workers work for the state) and guide them somehow into the private sector. Cubans are being encouraged to grow and sell their own fruits and vegetables. The government is inviting foreign investors to develop 10 golf course estates in Cuba, with a new law allowing 99-year land leases to foreign buyers of plots in such projects. In the old days of Fidel's revolution, such policies were unthinkable. So what is the potential for a liberalized Cuban economy? Just look 90 miles across the straits to Florida. A million Cuban-Americans call Miami home. Cuba has 60% of Florida's population and 80% of its landmass, but greater natural resources and a much longer coastline, so one might conclude that the two are of comparable overall potential. Perhaps to underscore their similarities, remember the fact that England and Spain cleanly swapped the two in 1763. Today, Florida's economy is 12 times larger than Cuba's. One reason is that Florida gets 20 times as many tourists as Cuba, plus an inflow of affluent retirees. When the US government stops restricting its citizens from traveling to Cuba, the island will become an instant tourist magnet. Offering short flights, sunny beaches, cool music, "old world" architecture and cheap surgery, Cuba should have no problem drawing several million American tourists a year, as further-away destinations like Costa Rica have done. Should reforms become comprehensive enough, agriculture seems an obvious investment play: Half the land is arable, labor is cheap and rain is plentiful. Cuba's once-vaunted sugar industry stands in disarray, with 80% of the old mills shut down. However, today's high sugar prices provide ample incentive to revive the sector, along with other traditional crops such as cigar tobacco. Despite its long coastline, fisheries and aquaculture remain largely overlooked. Cuba is a world-class producer of nickel, but other mineral deposits remain underexploited. And then there's the oil. The entire power system needs to be updated, financial services developed, retailing expanded – the opportunities seem endless. Beyond the subsidized basics, most consumer goods have to be imported, and imports draw heavy duties. Telecom services are costly due to government monopolization and inefficiency. The list goes on. In this environment, it is tough for most Cubans to get by unless they receive remittances, tourist gratuities or tea money. All in all, we eagerly await the implementation of Cuba's economic reforms. As this process unfolds, Cuba could transform into one of the world's most attractive frontier investment destinations. America has a long track record of turning bitter rivals into productive partners (a recent example being Vietnam), and re-engagement with Cuba could be one of Obama's most notable foreign policy legacies. Some frontier investors are not waiting for that and are already investing in Cuba. While 100% foreign ownership is permitted, most investors enter joint ventures with Cuban state enterprises, which typically contribute land, labor and sometimes capital. Over 250 such joint ventures exist, mostly for specific sectors or projects. Investments are made in foreign currency, eliminating exchange rate issues, and there are no restrictions on capital repatriation. Corporate income tax is 30% for joint ventures and 35% for wholly owned foreign companies, but tax holidays of five-seven years are available. A few Cuba-focused investment groups have been established that non-US investors can access. Canada-listed Sherritt Group is a major player in Cuban nickel mining and, formerly, telecoms. A private investment group backed by European investors, Coral Capital has restored Havana's historic Saratoga Hotel, which was recently ranked by Conde Nast as the 16th best hotel in the world. Coral is now planning a number of golf course, marina, housing and hotel projects, as is Leisure Canada, a Canada-listed investment vehicle. Regards, Douglas Clayton CUBA: Preparing for Perestroika originally appeared in the Daily Reckoning. Daily Reckoning founder Bill Bonner recently wrote articles on stagflation and the great correction.
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| Posted: 29 Mar 2011 07:27 AM PDT |
According to the text of Senate Joint Resolution 98, Ketron's purpose in initiating such a proposal is "to create a special joint committee to study whether the State of Tennessee should adopt a currency to serve as an alternative to the currency distributed by the Federal Reserve System in the event of a major breakdown of the Federal Reserve System."
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