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- Gold Stock Investors—Buy “Best of Breed”: John Stephenson
- 7 Niche ETFs For An Increasingly Globalized World
- Sears: Poor Prospect For Deep Value Investors
- Morning Outlook from the Trade Desk - 01/16/12 ... a tad late today...
- Revisiting Our Proposal for an Overnight Gold Fund
- Understanding Absolute Return Strategies
- Silver Wheaton Is Grossly Overvalued
- Gold Nears €1,300/oz - Euro Lower After EU Downgrades and Greece Jitters
- GEAB N°61 is available! Global Systemic Crisis - 2012: The year of the world’s great geopolitical swing
- Silver prices are felt in indian sarees and sweets
- Gold Jewelry Demand seen up by 10 to 15% in India in 2012
- Indian dealers remain optimistic about gold sales
- Dollar Cost Averaging - A Strategy For Making The Most Out Of Fluctuating Gold Prices
- Precious metal prices firm following French downgrade
- Gold Stock Investors—Buy "Best of Breed": John Stephenson
- Gold Standard Technical Operating Discussions 2: More Variations
- Will Gold Regain its Safe Haven Status in 2012?
- Dollar Deception : how banks secretly create money
- Got Gold Report – Signs of Life
- Gold Trend Forecast for 1st Quarter of 2012
- Couple of Recent Additions from South of the Equator
- Are We Really Going To Bomb Iran?
- The Debt of Capitalism
- Money Printing: The Ugly Truth Behind the “Good News”
- The Growing Energy and Oil Alliance Between China and Saudi Arabia
- Don’t Invest in Europe’s Debt
- This past week in gold
- If You Are A Blue Collar Worker In America You Are An Endangered Species
- When Your Broker Dealer Goes Bankrupt
- What If Your Broker Goes Bust?
| Gold Stock Investors—Buy “Best of Breed”: John Stephenson Posted: 16 Jan 2012 06:24 AM PST
Source: Zig Lambo of The Gold Report (1/16/12) Companies Mentioned: Agnico-Eagle Mines Ltd. – AuRico Gold Inc – Barrick Gold Corp. – Goldcorp Inc. – IAMGOLD Corp. – Kinross Gold Corp. – Osisko Mining Corp. – Pan American Silver Corp. The Gold Report: As a portfolio manager and an author of two books, The Little Book of Commodity Investing and Shell Shocked: How Canadians Can Invest After the Collapse, how do you see the prospects for the resource commodities in 2012? John Stephenson: I think, in general, my prospects and outlook are very bullish. The story continues to be one of strong demand out of China. I don't see that story changing. Obviously, there have been a lot of headlines and the Purchasing Managers' Index data in China recently are not as robust as they were, but its economy is still going to grow at 8.5–9%. That's pretty darn good. That's really where demand for most of these commodities will come from. Certainly, any improvement in Europe and the U.S. will be good news for commodities. TGR: Are there any specific ones you think will do better than others? JS: I'd have to say that oil will do very well. I think we'll see oil exit 2012 north of $130/barrel. Certainly, copper looks very strong. I could see that at $4.50/pound (lb) by the end of the year. Gold and precious metals will do well, also. Gold and precious metals are in a different category than the others, but, nonetheless, what I think is going to continue to drive that is Europe, and I think you'll see $2,500/ounce (oz) gold. TGR: So in that light, I guess $4.50/lb copper isn't that far out of line, if you're expecting gold in the $2,500/oz range. JS: I think what you're seeing across the board in commodities is very strong demand and weak supply. Nothing has happened that will improve that situation and the volatility we see daily has only made the situation worse. Suppliers have struggled to keep up. The smaller, more marginal players have had trouble getting financing as the volatility has increased. The eventual supply response, which would normally end a bull market, is going to be a long time coming. TGR: In this recent semi-panic where gold dropped into the low $1,500/oz range and people were saying it was all over—you're certainly not a believer in that if you're predicting $2,500/oz gold. JS: No. I'm not a believer in it. Gold shares some characteristics with other commodities in terms of supply and demand. Over the last 40 years, the average grade globally was around 9.6 grams/ton (g/t). It's now around 1 g/t. So, we're potentially facing a peak gold scenario as we may be in oil. Look at Barrick Gold Corp. (ABX:TSX; ABX:NYSE). It recently acquired Equinox Minerals Ltd. (EQN:TSX; EQN:ASX), a copper miner. That's how it's struggling to find replacement gold reserves. It had no better idea than to buy a copper miner. This is typical across an industry facing very challenging supply conditions. Gold is really taking on a different characteristic; it tends to be a commodity that is more of a currency than a commodity. I see it going higher ultimately because the solution to what ails Europe will be the need for the European Central Bank to step in line and start to print money. Once we have that, you're going to see gold move higher. What's kept gold down in the last few months has been that the U.S. dollar and U.S. Treasuries have become safe havens. But how much worse can things get in the world when you have the 10-year U.S. Treasury trading below 2%? TGR:: So you're pretty well convinced that we've seen the lows in the gold price? JS: Yes. There were several reasons why the low price dropped recently. Fund managers facing redemption requests looked around and said, "Well, this has probably been the best-performing asset in my portfolio this year and maybe the last 11 years." They felt that to meet these requests, they needed to sell. So there were a lot of things that were happening that weren't really related to gold or to the bigger story of what was happening within Europe. We have an enormous amount of paper money out there being debased. And the solution for these debts really is to debase more of this paper money. In that environment, people around the world are saying, "I want something tangible. I want something real. I want something I can hold in my hand, store, put in the bank or under my mattress." And the demand is going to remain very strong. I don't see that changing. TGR: So regardless of how all these problems evolve, as far as you're concerned, gold is going higher, no matter what? JS: No matter what! TGR: Obviously, you're a precious metals bull. What's your preference among the equities, the physical metal and exchange-traded funds (ETFs)? Or is it a combination of all of them? JS: A combination makes sense. The reason people have held the equities is because they get leverage to the gold price. So assuming that costs don't increase at the same rate as the metal itself increases, you get increasing earnings and, therefore, on a consistent multiple basis, you get a higher share price and greater leverage to it. The situation for gold miners has really changed over the last, say, four to five years. If we look back, 12 or even 15 years ago, we saw that for the first three or four years of that period, from early 2000–2004, the actual miners outpaced the metal by a three times multiple. Right now, evaluations have fallen so steadily for the miners that probably the smarter bet is to look at the equities. Certainly, the physical metal has some storage and handling costs associated with it. So I would say if you had to choose between the three, you would probably, at this point, look mainly to the miners, somewhat toward the ETFs and maybe hold a small amount physically for safekeeping. TGR: In your portfolio management business, what criteria do you consider in selecting companies for your funds? JS: Valuation is obviously one. We do a fair bit of work in terms of determining what we think the fair value is relative to what particular miners are trading at. We also look for reserve growth and the potential for production growth. Then I think a very important consideration is where in the world they are producing it, because geopolitical risk has taken on a whole new concern. As the traditional supply basins have started to run dry, companies have had to go further and further afield, creating additional problems. So we try to look at stable geopolitical jurisdictions that are attractive and mining friendly. We look for companies that have production histories that are strong and likely to continue, coupled with outstanding management. TGR: Makes sense, although it is a moving target as things change, and what once appeared to be stable doesn't look so stable anymore. JS: That's right. You can't just buy and hold. You have to keep following up. TGR: 2011 was a tough and disappointing year for a lot of investors considering what the metals did and the resource stocks didn't do. What are you expecting to happen this year with the mining equities? Are they going to finally catch up with the commodities price? JS: Yes. Our view is that mining equities will outperform the metals in 2012 and that now is a good time to be looking at the mining companies themselves. We think that the commodity itself will be very strong because the Europe situation is coming to a head and will be a catalyst to lift prices higher. The miners will play catch-up and multiples will go from compressing to expanding, or at least not compressing any further. TGR: You do quite a bit of research and have become quite familiar with a broad range of companies in the mining development and production business. Can you talk about some of the ones you like, maybe starting with some of the seniors and working your way down? JS: In terms of relative size and scale, you don't get any bigger than Barrick. The stock is trading at less than 10x earnings, which in itself is phenomenal and less than 1x net asset value (NAV). It has better growth than Newmont Mining Corp. (NEM:NYSE), and it's the largest producer in the world. It has struggled, there's no question about it, but if you're looking for a value play, something that is liquid, well managed and has very strong growth. Going with the largest in the industry at almost 9 million ounces (Moz) per year, you have to look at Barrick. TGR: Barrick has gotten to be so big. Is it going to be able to grow internally or will it just have to continue making acquisitions? JS: I think that's the issue, and you have correctly identified why investors have been a little skeptical on the name. At some point, things get cheap enough that you have to look at it and give it some credit. Looking back over the history of Barrick, it had a hedge book and much of its upside was hedged. Then as gold took off, people said it wasn't going to get credit for it if it had the hedge book on it. So the hedge book was taken off and unwound. Then people said it needed to show production growth, which it did. At some point, when the chips are down, people are going to say, "Here's a company that's delivered." But, you're right. It's hard to see how it can become a 10–11 Moz producer from around 9 Moz and continue to replace reserves, particularly in a world of declining ore values. But, if you think that the world of investments is going to bounce all over the place as the headlines out of Europe dominate trading, then I think you need to be somewhere where they're printing money, and this is what Barrick is doing. The next senior I would highlight is Goldcorp Inc. (G:TSX; GG:NYSE). This is the third largest gold producer in North America. What's unique about Goldcorp is that it offers a blend of things that are almost never found in one company. It has good growth and great production diversity—not just producing from a single mine. It's the lowest cost major producer, with cash costs at roughly $550/oz. Typical industry average is closer to $875/oz. It has a strong balance sheet, and it's operating in politically secure parts of the world. So the chance of expropriation is pretty low. And, it's liquid. So we really like this. TGR: How about Intermediates? JS: On the intermediate producers, with production in the 800 thousand ounces (Koz) to 1–1.5 Moz per year range, we like IAMGOLD Corp. (IMG:TSX; IAG:NYSE). It has a number of mines around the world, largely in the Americas, but also in Africa. It has recently brought in a new management team, which is focused on really servicing value. It brought in someone who is not from the industry but a turnaround expert, and it's looking at really harvesting this value. With its good mines and good operating profile plus a bent toward servicing value, this name should move higher. Another intermediate that we like is Agnico-Eagle Mines Ltd. (AEM:TSX; AEM:NYSE). It has a number of mines in Finland, Canada and Mexico. This was a company that was a Street darling for many, many years. It probably has the best management team out there. It has had a few stumbles lately. It actually closed one of its mines, Goldex in Quebec, and wrote off the asset, so the stock has fallen because people have probably lost a little confidence in management's ability to deliver. It was essentially trying to bring on five mines in two years' time, and that's really just too high an expectation. But at this price level, it has excellent growth and still is a name to look at. TGR: And then Juniors? JS: In the junior producer category, there are two names I think are worth looking at. One is Osisko Mining Corp. (OSK:TSX), which is very quickly moving into the intermediates. Until we get robust global growth, a company that is going to make this transition very quickly is obviously desirable for that reason, if nothing else. Osisko is already producing from its Canadian Malartic gold deposit in Quebec even though it just finished the original mine plan. It's already producing around 600 Koz/year and has some catalysts for growth. Once you start production, you see a re-rating in your shares. This is trading at a discount to its junior and intermediate peers in terms of a multiple basis, but we think that multiple will expand as it continues to produce. It also has another property that gives it some option value and some further upside. Lastly, we like AuRico Gold Inc. (AUQ:TSX; AUQ:NYSE) with three operating mines in Mexico and two in Australia. It recently commissioned a new mine at the Young-Davidson project in Ontario. We think this is another company that has a very strong growth profile and has been a bit in the penalty box, but it's really too cheap at this point not to be looked at. So we think this is a potential double in terms of per-share value over the course of the next year to year-and-a-half. TGR: AuRico has somewhat come out of nowhere with a name change and then these acquisitions. It's actually quite a diversified situation with these properties spread out all over. JS: Yes, it is. It used to be called Gammon Gold and then bought Northgate. We think that this is a name that should do very well. Given that it's trading below its NAV at this point, it's just too cheap to be ignored. It has a heap leach at its Ocampo property that continues to struggle a little bit. But I think all these issues are well known. At this level, this name and really all the others, should be bought, if you believe that gold prices will move higher, which we certainly do. TGR: You probably look at a lot of other little companies that maybe are not suitable for your portfolio. Do you have any you might like to mention that you think are good speculations but not necessarily investment quality? JS: Yes. Obviously, lots of gold companies come along that we think are interesting. I'm skeptical to mention some of these names because I think that for most investors, they're a binary outcome. They either make it or they don't, and in more cases than not, they struggle. I think, certainly, you could make a case for Pan American Silver Corp. (PAA:TSX; PAAS: NASDAQ) and some of these other names that are smaller, but they're really a beta play on gold because when you start looking at some of these silver names, they typically trade in a much more volatile pattern than the gold producers. I think for many investors, the volatility isn't worth the ride. TGR: What sort of strategy are you suggesting investors use this year for maximizing their gains or not having the same sort of performance we had last year? JS: We've seen mining company valuations trend down for many years. Now is a good time to start building positions by buying the best of breed—the ones that will do well in an increasing gold scenario that have little or no operational risk and are larger-cap names. Besides Barrick and Goldcorp, certainly, Kinross Gold Corp. (K:TSX; KGC:NYSE) would be another name to look at. I think its growth comes a little further out, probably in 2013, but you can start to take a look at that. I think turnaround situations like Agnico-Eagle Mines might be very good to look at. Keep in mind, if you're buying a mining company, it's making lots of money at $1,500–1,600/oz gold, but if you buy an ETF or the physical metal, you're hoping it goes from $1,600/oz to $2,000/oz or $2,500/oz in order to make a profit. In the case of a mining company, you don't need it to go anywhere. All you need is some recognition that there is value today in these companies, and there will be value tomorrow, as they, it is hoped, find more reserves and produce them. TGR: Are there any parting thoughts that you'd like to leave with our readers? JS: I would advise people to keep in mind that if there ever was a time for an investment in gold and gold equities, it is now. We have a very unusual situation in the global economy, where there really isn't any obvious exit path other than the monetization of the debts. Gold companies have suffered because people have flocked to other safe havens, namely the U.S. dollar, but the U.S. has its problems as well. In general, if you're with a company that has more than one operating mine in geopolitically safe parts of the world and has a demonstrated track record of increasing reserves and production, then I think those are the things that will, in the longer run, reward you. Short run speculating may be exciting but I think most people need to invest in things that have the potential to be higher a year from now than they are today. I think, right now, this is gold equities. TGR: Thank you for your thoughts, input and insights. I hope 2012 will be a better year for everyone. We look forward to seeing how all of this comes about. JS: I hope so. John Stephenson is a senior vice president and portfolio manager with First Asset Investment Management Inc., where he is responsible for a wide range of equity mandates with a particular focus on energy and resource investing. He has been recognized by Brendan Wood International (BWI) as one of Canada's 50 best portfolio managers for the past three years. He is the author of The Little Book of Commodity Investing (John Wiley & Sons, 2010), which has been translated into five languages, and Shell Shocked: How Canadians Can Invest After the Collapse (John Wiley & Sons, 2009) and writes a free bi-weekly investment newsletter, Money Focus, which reaches a global audience of more than 125,000 (www.reportonmoney.com). Stephenson is regularly quoted by Bloomberg News, Reuters, The Associated Press, The Wall Street Journal and The Globe and Mail and is a frequent guest on Bloomberg TV, CNBC, CNN, Fox Business and Canada's Business News Network (BNN), Sun TV and the CBC. He is frequently the keynote speaker at investment conferences throughout North America. Stephenson holds a degree in mechanical engineering from the University of Waterloo, a Master of Business Administration from INSEAD, as well as the Chartered Financial Analyst (CFA) and Financial Risk Manager (FRM) designations. Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Exclusive Interviews page. DISCLOSURE:
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| 7 Niche ETFs For An Increasingly Globalized World Posted: 16 Jan 2012 05:20 AM PST By Kevin Quon: The world is becoming ever more entwined. The modern world has become a vast economic forum where flooding in Thailand affects US electronic consumers, European politics can strike fear into American investors, and Congolese mining rights can attract Chinese political favor. In the era of globalization where information flows on cables traveling at the speed of light, investors thinking the world was as geographically polarized as it once was may have to reconsider the present reality. Yet just as the world has become more interconnected so has the trading stage for international exposure. Not long ago, your typical American investor had scarce means of reaching out to world developing around him, which often required accounts based on foreign stock exchanges in order to gain access to international equities. And yet today, he can invest in Chinese oil companies, seek safety in African gold mines, and take a position in Brazilian Complete Story » |
| Sears: Poor Prospect For Deep Value Investors Posted: 16 Jan 2012 04:43 AM PST By The Sane Investor: After the plummet Sears Holdings (SHLD) experienced since late 2011, value investors like myself have begun to kick the tires and see if Sears might have been irrationally bid down. click to enlarge I usually look at large national brands or companies that are still profitable whose stock has begun trading deeply below a price to book ratio of one (i.e. their stock is trading for less than their shareholder's equity (SE) on the balance sheet). After a company like Sears is selected (P/B of 0.48), I look at what exactly the assets are that I would be getting. This is due to the fact that in terms of SE on a balance sheet, a dollar of cash is valued the exact same as goodwill from an acquisition, even though in bankruptcy court cash is far more valuable than goodwill. So what do we get right now with a share Complete Story » |
| Morning Outlook from the Trade Desk - 01/16/12 ... a tad late today... Posted: 16 Jan 2012 04:31 AM PST Too many e-mails this morning. Not much to add to the markets. Gold NEEDED a close above $1,635 Friday and managed to surmount the level. As long as gold maintains itself above this level, the markets should continue higher. First level of resistance remains around $1,675. |
| Revisiting Our Proposal for an Overnight Gold Fund Posted: 16 Jan 2012 04:23 AM PST In August 2010 we wrote an article entitled "Proposing An Overnight Gold Fund" in which we explored the potential for launching a fund that held long positions in gold overnight and was short gold during the day. We pointed out that "a hedge fund starting in 2001 with $100m, with the strategy of being long gold from the PM to AM fix, and short gold from the AM to PM fix...would be worth $2.16billion today, before any fees and expenses." We have been monitoring this trading strategy since then and therefore would like to take this opportunity to update readers on its astonishing progress. click to enlarge Firstly we will introduce the thinking that led us to investigate this trading strategy. There is much debate within the precious metals industry regarding the alleged suppression, or at least manipulation to an extent, by either central banks or the proprietary trading divisions Complete Story » |
| Understanding Absolute Return Strategies Posted: 16 Jan 2012 04:20 AM PST By Alex Gurvich: In my previous articles I talked about uncorrelated strategies and how to achieve them. I hope that was useful, please let me know. Now I want to take you down further the rabbit's hole and speak about the Absolute Return strategies and how it will save your portfolio and avoid the types of collapse of 2008. If you are a trader and not an investor, you are yawning already, so I recommend you move on. If you are an investor and you want to figure out how to pay for your kids college education, then I ask you to stay with me. In the world of investing, there are two white elephants that investors don't talk about, one is the Short Biased strategies and the other is Absolute Return strategies. They don't talk about the first because of fear and they don't talk about the second because of greed. The Complete Story » |
| Silver Wheaton Is Grossly Overvalued Posted: 16 Jan 2012 01:42 AM PST By Dividend Kings: With Silver Wheaton (SLW) trading at the bottom end of its 52 week range, I decided to take a closer look into the company to see if it is an attractive opportunity for investors. Here are six points I looked at while researching SLW: Valuation: SLW's trailing 5 year valuation metrics do not have a clear bias as one is above the 5 year average and the other one is below. SLW's current P/B ratio is 4.3 and it has averaged 3.7 over the past 5 years with a low of 1.8 and high of 6.4. SLW's current P/S ratio is 15.7 and it has averaged 18.8 over the past 5 years with a high of 31.1 and low of 9.8. SLW's current P/E ratio is 20.5 and it has traded in a range between 20 and 40 over the past year. Price Target: The consensus price target for the Complete Story » |
| Gold Nears €1,300/oz - Euro Lower After EU Downgrades and Greece Jitters Posted: 16 Jan 2012 01:32 AM PST |
| Posted: 15 Jan 2012 11:50 PM PST - Public announcement GEAB N°61 (Jan. 16, 2012) -  This GEAB issue makes it six years that the LEAP/E2020 team have shared their anticipations with their subscribers and readers of their public briefing on the development of the global systemic crisis each month. And, for the first time, in the January issue which presents a summary of our anticipations for the year to come, our team anticipates a year which will not result solely in a worsening of the world crisis but which will also be characterized by the emergence of the first constructive elements of the "world after the crisis" to use Franck Biancheri's phrase from his book « The World Crisis: The Path to the World Afterwards ». According to LEAP/E2020, 2012 will in fact be the year of the world's great geopolitical swing: a phenomenon which will without any doubt be the bearer of serious difficulties for most of the planet but which will also allow the emergence of geopolitical conditions favourable to an improvement of the situation in the years to come. Contrary to the previous years, 2012 will not be a "wasted" year, stuck in the "world before the crisis", through lack of audacity, initiative and imagination on the part of the world's leaders and because of people's great passivity since the beginning of the crisis. We had qualified 2011 as the "ruthless year" because it was going to shatter the illusions of all those who thought that the crisis was under control and that they were going to be able to go back to their "private deals" as in the past. And 2011 was ruthless for many political leaders, the financial sector, investors, Western debts, world growth, the US economy and for the absence of Euroland governance. Those who believed themselves untouchable or a permanent fixture suddenly discovered that the crisis saved nothing or no-one. This trend will, of course, continue in 2012 because the crisis does not respect the Gregorian calendar either. The last "untouchables" will experience it: the United States, the United Kingdom, the Dollar, T-Bonds, Russian and Chinese leaders,… (1) But 2012 will also see, especially in the second half, the forces and players assert themselves who in 2013 and the following years will enable the beginning of the rebuilding a new international system, reflecting the expectations and power struggles of the XXIst century and no longer those of the middle of the XXth century. Therein, 2012 will well be the year of the great swing between yesterday's and tomorrow's world. A year of transition, it will mix the worst (2) and the best. But in so doing, for our team, it nevertheless constitutes the first constructive year since 2006 (3). Incidentally, in this issue we present the 35 developments/subjects, which are equally recommendations, which we anticipate will mark 2012: 20 developments rising and 15 subjects falling. This list can thus be of great practical help to the GEAB reader to prepare for the coming year. Reducing the time wasted reading articles on subjects which are already secondary in terms of impact on the course of the events or, on the contrary, taking the time to look further into developments which tomorrow will be at the core of coming developments, not to be taken by surprise by the major developments of the coming year, that's what we want this 2012 list of 35 "Up and Down" to be used for. For six years, with a success rate of between 75% and 85%, this annual anticipation is thus a particularly practical decision-making aid for the twelve months to come. In addition in this issue, our team gives an in-depth analysis of the nature and consequences of a possible QE3 which the US Federal Reserve might launch in 2012 (4). Hoped for by some, dreaded by others, QE3 is generally presented as the ultimate weapon to save the US economy and financial system which, contrary to the dominating chatter of these last weeks, continues to deteriorate (5). Whether the FED launches out with QE3 or not, QE3 will be without any doubt the major financial event of 2012 whose consequences will mark the world financial and monetary system definitively. This GEAB issue will enable you to have a precise idea on the subject.  And QE3 will play a determining role in the world's great geopolitical swing in 2012 because this year will, in particular, see the last attempts of the world's dominant powers of before-the-crisis to maintain their global power, whether it be in strategic, economic or financial matters. When we use the term "last" we want to stress that after 2012 their power will be weakened too much to still be able to claim maintaining this privileged situation. The recent S&P downgrade of the majority of the Euroland countries is a typical example of these last chance attempts: pushed by Wall Street and the City, and because of their insatiable financing needs (6), the United States and United Kingdom have arrived at the point of engaging in open financial warfare with their last allies, the Europeans. It's geopolitical suicide because this attitude obliges Euroland to reinforce and integrate still more and whilst dissociating itself from the United States and United Kingdom; whilst the vast majority of the Eurozone leaders and the populations have finally understood that there really was a transatlantic and cross-Channel war being conducted against them (7). LEAP/E2020 will present its anticipations on this subject - "Europe 2012-2016" - in the next GEAB issue which will appear on the 15th February, 2012.  On another agenda, the attempts to create a "little cold war" with China or setting a trap for Iran on the question of free movement in the Straits of Hormuz arise from the same reaction (8). We'll return to that in more in detail in this issue. The great swing of 2012 is also that of the people. Because 2012 will be also the year of people's anger. It's the year when the people will massively enter on the global systemic crisis' stage. 2011 has been a "warm-up lap" where the pioneers tested methods and strategies. In 2012, the people will assert themselves as the forces at the origin of the major swings which will mark this turning point. They will do it pro-actively because they will create the conditions of decisive political changes via elections (as it will be the case in France with the ousting of Nicolas Sarkozy (9)) or via mass demonstrations (the United States, the Arab world, the United Kingdom and Russia). And they will also do it more passively by generating fear in their leaders, obliging the latter to take a "pre-emptive" attitude to avoid a major political shock (as it will be the case in China (10) or in several European countries). In both cases, whatever the elite of the countries concerned think, it's a constructive phenomenon because nothing important or lasting can emerge from this crisis if the people do not involve themselves (11). The great swing of 2012 is also the accelerated collapse of the Western banks and financial institutions' power which is a reality described in this issue, contrary to the current populist chatter which forgets that the starry sky that we look at is an image of a long-gone reality. The crisis is such a speeding-up of history that many have not yet understood that the power of the banks which they worry about is that which they had before 2008. It's a subject with which we deal in detail in this issue. At the same time, one continues to see investors flee the stock markets and financial assets particularly in the USA (12).  And the great swing is finally the arrival at maturity of the BRICS, who after five years of self-seeking and taking their bearings will, in 2012, start to have a strong and pro-active influence on international decisions (13). However, without any possible doubt, they constitute one of the essential players for the emergence of the world after the crisis; and a player who contrary to the United States and the United Kingdom knows that it's in its interest to help Euroland get through this crisis (14). With a Euroland stabilized and equipped with a solid governance, the end of 2012 will thus present itself as the first opportunity of founding the bases of a world whose roots won't bury themselves in the Second World War aftermath any more. Ironically, it's probably the Moscow G20 summit in 2013, the first to be held outside the Western camp, which will crystallize the promises of the second half of 2012. --------- Notes: (1) And the European debt crisis serial until the end of the first half of 2012. The year will also be very difficult for Euroland as the scenarios prepared by OFCE show. But it will prove distinctly less difficult than the financial experts and media anticipate today because they underestimate on the one hand the progress made as regards Euroland governance which will bear fruit in second half of 2012; and on the other, the change in psychological context once the world's attention transfers to the US and British problems. On this subject, here a new example of Euro misinformation published by MarketWatch on 01/09/2012: the columnist, David Marsh, tries to give credit to the idea that the spring 2012 French presidential election will be more bad news for the Euro by explicitly stating that François Hollande is an Eurosceptic. As everyone knows in France, François Hollande is, on the contrary, a pro-European and fiercely pro-Euro which leaves only two options relating to MarketWatch/Marsh: either they don't know what they are talking about, or they are deliberately lying. In both cases, that throws some light on the value of the opinions of the major US financial press on the Euro and its future. Those who follow it will lose a lot of money! Still concerning Euroland, the Spiegel of 01/03/2012 offers an interesting plunge into how Merkozysme works which shows how much the two countries are definitively binding their destinies: a development which will accelerate after François Hollande's election that won't have, like Sarkozy, a foot in Euroland and a foot in Washington. (2) In particular a continuation of the widespread rise in unemployment. Source: Tribune, 31/10/2011 (3) A poetic note makes it possible to illustrate our approach here, which follows on the basis of the methodology of political anticipation described in the "Manual of Political Anticipation" by Marie-Hélène Caillol, the LEAP president. What should be remembered about the winter solstice? That it marks the heart of the winter because it's the shortest day? Or that it announces spring because from this date the days start to get longer? Both answers are correct. But the first doesn't say much about the future except that it will continue to be dark and probably cold for a certain period of time; it's a photograph, a motionless analysis. On the other hand, the second answer leads the gaze to a more remote future and underlines the existence of a process in action which will lead to changes in terms of the length of the day and perhaps the temperature; it's a dynamic vision of events. Moreover, henceforth the methodology of political anticipation has its place in scientific debate since Marie-Hélène Caillol has been invited to contribute to an issue especially dedicated to Anticipation (Volume 41, Issue 1,2012) (coordinated by Professor Mihai Nadin) of the US science magazine the "International Journal of General Systems" (Francis & Taylor), a multidisciplinary periodical devoted primarily to the publication of original research contributions to system science, basic and applied. The article which resulted from this collaboration is entitled: "Political Anticipation: observing and understanding the global socio-economic trends with the objective of guiding the decision-making process". (4) The recent publication of the 2006 FED minutes perfectly illustrates one of our working hypotheses: the persons in charge of a complex system are generally unable to perceive the moment when it will swing in crisis or chaos. As was the case of Alan Greenspan, Timothy Geithner and associates in 2006, it's the case of the masters of the City, Wall Street or Washington in 2012... who happen to be the same in a number of cases. Source: New York Times, 12/01/2012 (5) The US situation's deterioration is occurring in spite of the wish to hide it by the main media and rating agencies; whilst in Euroland the situation has not deteriorated as much as these same media and agencies would like one to believe. By dropping a little time to time, the outcome is thus no longer in any doubt. As regards US economic deterioration, it's enough to note the collapse of bank profits, of US consumption (the advertisements blaring out the holidays thus gave way to quite poor figures), continuous closings or bankruptcies of retail networks, unemployment kept at historic rates, the growing problem of paying pensions, budget collapse of the large public universities,… Sources: YahooNews, 12/01/201; Bloomberg, 12/01/2012; USAToday, 12/01/2012; CNBC, 28/12/2011; Washington Post, 27/12/2011 (6) As the table below shows, with a debt to GDP ratio of 900%, the United Kingdom is like an animal caught in a debt trap. And because of the British financial sector's enormous weight of debt, it's condemned to try and force Euroland to pay Greek debts by any means, etc… The Western public debt downgrade is a bazooka pointed on the heart of the Kingdom, the City. Source: Guardian, 01/01/2012 (7) All the better because there is nothing worse than being at war without knowing it as Franck Biancheri wrote on Twitter commenting on the French presidential election campaign twitter.com/Fbiancheri2012. (8) Russia already made its choice by developing trade with Iran in Roubles and Rials, eliminating the US Dollar from transactions between the two countries. As for Europe, it is fidgeting under US pressure, but ultimately won't make a big deal as regards an embargo because by June (a new date to make a decision), the political map will have really changed. Sources: Bloomberg, 07/01/2012; Le Monde, 09/01/2012 (9) That which, by the way, will put France in its historical "Gallic-European" relationship instead of the occidentalist anchorage which embodied the Sarkozy interlude. Source: Le Monde, 11/01/2012 (10) In China, according to LEAP/E2020, the risk of a major grassroots explosion is at the crossroads of a tense economic situation (which will be the case in 2012 - see this GEAB issue) and a public health major accident; much more than in a context of direct political reconsideration. (11) The advert by the Egyptian Muslim brothers that they will subject the peace treaty with Israel to a referendum belongs to this same trend. Source: Haaretz, 02/01/2012 (12) Source: CNBC, 06/01/2012 (13) The Chinese leaders, for example, seem more determined than ever to follow the path which they consider the best (including the conquest of space, a symbol par excellence of leadership), rejecting external pressures. Source: Caixin, 04/01/2012; ChinaDaily, 30/12/2011; NewYork Times, 29/12/2012 (14) Source: 20Minutes/Suisse, 08/01/2012 |
| Silver prices are felt in indian sarees and sweets Posted: 15 Jan 2012 11:46 PM PST |
| Gold Jewelry Demand seen up by 10 to 15% in India in 2012 Posted: 15 Jan 2012 11:44 PM PST |
| Indian dealers remain optimistic about gold sales Posted: 15 Jan 2012 11:30 PM PST Towards the end of 2011 India's gold and silver imports fell. Upon conclusion of the festival season - which started back in October with the Diwali festival of light, followed by the wedding ... |
| Dollar Cost Averaging - A Strategy For Making The Most Out Of Fluctuating Gold Prices Posted: 15 Jan 2012 10:18 PM PST |
| Precious metal prices firm following French downgrade Posted: 15 Jan 2012 10:00 PM PST Though it has yet to break through selling resistance at $1,650, gold has recorded small gains in trading this morning following on from Friday's announcement from Standard and Poor's ... |
| Gold Stock Investors—Buy "Best of Breed": John Stephenson Posted: 15 Jan 2012 06:00 PM PST When it comes to picking gold mining names in the current market environment, John Stephenson, author and portfolio fund manager at First Asset Investment Management, believes that buying the "best... Visit the aureport.com for more information and for a free newsletter |
| Gold Standard Technical Operating Discussions 2: More Variations Posted: 15 Jan 2012 05:30 PM PST |
| Will Gold Regain its Safe Haven Status in 2012? Posted: 15 Jan 2012 05:04 PM PST |
| Dollar Deception : how banks secretly create money Posted: 15 Jan 2012 04:30 PM PST web of debt |
| Got Gold Report – Signs of Life Posted: 15 Jan 2012 02:40 PM PST
HOUSTON (Got Gold Report) – Since the last full Got Gold Report both gold and silver have seemingly found their 2012 footing, putting in bounces more or less in line with our expectations. Well, actually gold fetched up above our hoped-for reentry target, but we admit to having a buy-only-if-cheap attitude there. For the week gold logged a $22.37 (1.4%) advance for a last trade of $1,638.68 (USD Cash Market). As Vultures (Got Gold Report Subscribers) already know, we have adopted the notion that gold is currently inside a giant, months-long pennant formation – still digesting its fear-assisted parabolic interim pinnacle of $1,923 last September. Most technicians will agree that pennant formations are often continuation patterns that resolve in the direction of the prevailing trend more than not. Silver added $1.01 or 3.5% this week to close at $29.71 in New York. We regard silver as also being in a huge consolidation, a giant "flag" formation that has been in play since its near $50 parabolic surge in April of 2011. As the very simple chart below depicts, our view is that silver has recently been contracting in a bullish falling wedge pattern inside that great flag formation. (A consolidation inside a larger consolidation as part of silver's digestion of the new higher plateau.) As everyone knows by now, silver bounced precisely in line with its September panic spike nadir (about $26.15), which happens to coincide with where it found support last January, 2011. (Brown dashed line.) Therefore $26 has once again proven it is an important support zone for the second most popular precious metal. The support bounce is pretty interesting to us (Vultures know why), but perhaps just as interesting is that from our simple-Simon trading point of view, silver made a run at a breakout of that falling wedge on Thursday, January 12, touching $30.62 briefly before running into a Euro-centric negative news loop and a profit taking, just ahead of a 3-day-weekend-"Give Back Friday." Like pennants, flags are contra-trend consolidations or digestion periods that often, but not always, resolve in the direction of the prevailing trend. Although flags are normally thought of as more short-term animals, we do indeed believe they are appropriate to consider in longer-term events inside great secular bull markets. We use much larger, easier to read charts that we share with Vultures on the subscriber pages, and that is where we comment weekly in dialog boxes directly inside those big graphs. It is our preferred way to communicate and we plan to do more of that and less of 'this' in 2012. It is just more efficient to do so. Just below is a much reduced example of one of those very large linked graphs - the 3-year weekly gold graph. The graph normally fills a computer screen and then some, by the way. Note that even in this greatly reduced format, the giant pennant formation idea we have championed is quite visible. Perhaps less visible is a budding breakout attempt of a declining wedge inside that giant pennant, which just got underway this past week. We have to be somewhat impressed that gold and silver advanced despite continued Orwellian strength in the U.S. dollar this past week. Note the comments in the graph. The U.S. dollar is imperfect; it is far from a satisfactory, stable and confidence inspiring, well-backed medium of exchange, but for the time being, at least, the greenback is where people gravitate to in a time of crisis. That is even if the dollar is merely a waypoint on the road to something else for scared European wealth. The U.S. dollar is deep, liquid and accepted worldwide, for now. But gold is rapidly gaining acceptance and confidence as an alternate "currency" to fiat money. Come to think of it, the "dollar-gold-exchange-rate" pretty much confirms that notion, does it not? As fiat currencies everywhere have been in an accelerated competitive debasement phase, since about, oh, say 2005, haven't we seen the major fiat currencies all losing purchasing power at a blistering pace? Isn't that the same thing as gold gaining in purchasing power relative to those debt-based paper promises? Just below is a graph of the Euro Index in terms of gold metal for reference. When most people think of currency fluctuations they think in terms of one fiat currency versus another. This graph shows the "value" of Euros to "buy" the one "currency" that cannot be printed and abused by politicians and central banks. Quietly, but surely, gold is taking over the lead role as the ultimate reserve "currency" on Earth. Decades of an experiment where the world's leaders were entrusted with the responsibility of maintaining their currencies without the burden of being tied to gold – without gold being the "currency policeman" proves at least one thing. That governments will not act responsibly in the monetary realm without an "enforcer" to govern them. In the 41 years since August, 1971, when President Nixon severed the last feeble ties of the world's reserve currency, the U.S. dollar, to real gold metal, governments have gone hog-wild, making government-give-away promises to their voters, borrowing to pay for them, racking up deep oceans of sovereign debt in the absence of that currency policeman. Debts that cannot be repaid in today's value currencies, at spending levels that cannot be sustained in any currency. We are involved in the slow-but-accelerating-motion involuntary global restoration of sound money, which 'smart money' figured out quite some time ago. Given the size and depth of that 'ocean of irresponsibility,' and given that there are really few alternatives for the world's wealth to seek safe haven, we conclude that there is little chance that 2012 will be a year where confidence in fiat currencies increases and confidence in gold decreases. To the contrary, we are more likely still in Act I of this Greek Tragedy, in Intermission, about ready for the curtain to open for Act II. *** Vultures (Got Gold Report Subscribers) will find much more about the gold and silver markets in our technical charts located on the password-protected subscriber pages. For this particular GGR we plan to focus on some of the indicators we track for gold, silver and the small miners and explorers we love to 'game.' We believe it is a time for cautious optimism, as we do indeed see a few tentative signs of life beginning to show. With that brief introduction, let's pause here and move directly into the full Got Gold Report. Got Gold Report First things first, the Got Gold Report – the full report – is published ad hoc, as conditions change, usually about biweekly, but at least 18 times per year. Between full GGR reports we communicate more regularly on the GGR web log, which is always free and open to the public, or in our COT Flash reports, via email Special Notes and Vulture Bargain Hunter (VB Updates) reserved exclusively for subscribers. COT Flash reports appear on off weeks for the Got Gold Report when there are what we consider important changes in the commitments of traders reports which cannot wait until the next full report. VB Update offerings appear ad hoc (usually monthly) as there are developments we feel merit comment for and in the resource company issues we track closely. Email Special Notes are used sparingly, but are used to communicate issues we deem important between other offerings. Our aim is to briefly summarize our positioning for the gold and silver markets, and to highlight a few of the dozens of indicators, ratios and graphs we keep in constant touch with. Vultures, after logging in, please see the commentary in our numerous technical charts located in their own section of the password-protected subscriber pages. We update most of the Got Gold Report linked charts each week (some holidays excepted), placing our commentary in dialog boxes in the charts themselves. Changes to the linked charts are almost always completed by 6:00 pm ET on Sunday evening (except when Monday is a holiday) and occasionally during the week as events unfold. To continue reading, please log in or click here to subscribe to a Got Gold Report Membership. |
| Gold Trend Forecast for 1st Quarter of 2012 Posted: 15 Jan 2012 02:11 PM PST Over the past five months gold has fallen sharply and is no longer headline news which it once dominated back in 2011 when it was making new highs every day. The shiny metal has been under pressure because traders and investors started to pull some money off the table to lock in gains. Gold prices had surged so fast most advanced traders knew that final high volume surge was not sustainable. But the main reason gold topped out in my opinion was because the US Dollar index had put in a bottom and started to build a base. As we all know a rising dollar typically means lower stocks and commodity prices. I have posted some charts below covering gold in detail using multiple time frames. The weekly which is long term, daily which is the intermediate trend and the 4 hour chart which shows gold momentum and intraday action. At the very bottom I talk about the US Dollar and what is happening with that. Gold Weekly Long Term Trend Analysis The weekly chart is not the most exciting time frame to follow as you will grow old watching it. That being said it is crucial for understanding the long term trend, price and volume analysis. Below you can see that gold's recent pullback has been a 3 wave correction, which is a normal pullback for any investment. But taking into account the rally from 2008 – 2011 I feel this pullback will have one more low put in before bottoming out. This would make for a 5 wave correction much like what happened in 2008.
Daily Chart of Gold Showing the Intermediate Trend The daily chart allows us to see gold intra-week price action and use the 150 moving average which is my preferred daily moving average. As you can see we are getting a similar pullback as 2008 with gold now trading under the 150 MA. I would like to see gold make another lower low in the next 2-3 months. If that happens I feel it complete the correction and trigger a strong multi month or multiyear rally in gold.
4 Hour Intraday Chart of Gold The 4 hour chart of gold allows us to see all the intraday price action which would normally not be seen with a daily chart. It also gives us enough data to build our analysis upon. My preferred setup for gold which I feel if happens will trigger major buying in the yellow metal. If/when we get a rally in gold would also likely mean some more economic uncertainty has entered the market either from within the USA, Europe or China…
Weekly Dollar Index Long Term Analysis The dollar has the potential to rally to the 87 – 88 level before putting in a major top. For this to happen we will need to see the Euro crumble (both currency and countries divide) in my opinion. If you look at the weekly chart of gold and this chart of the dollar index you will notice that gold topped when the dollar bottomed. Over the past couple year's gold and the dollar have had an inverse relationship to each other. With all kinds of crap about to hit the fan overseas I think it's very possible gold will rally with the dollar. Reason being there is way more people overseas who want to unload their euro's and with all the negative talk and doubt with the US Dollar individuals will naturally want to buy more gold.
Weekend Trend Trading Conclusion: In short, I expect a bumpy ride for both stocks and commodities in the first quarter of 2012. With any luck gold will pull back into my price zone shaking the majority of short term traders out just before it bottoms. And we will be positioning ourselves for a strong rally buying into their panic selling. To just touch base on the general stock market quickly. I have a very bearish outlook for stocks. If the dollar continues to rise it is very likely the stock market will fall into a bear market. So I am VERY cautious with stock at this time. If you would like to receive my Weekly reports, updates and trading education videos each week join my free newsletter here: www.GoldAndOilGuy.com Chris Vermeulen |
| Couple of Recent Additions from South of the Equator Posted: 15 Jan 2012 02:00 PM PST Just got these. There's New Zealand's effort at a Lunar Dragon and a 2005 Kangaroo from the Australia. Both are dollar denominated. The NZ Dragon was insanely frustrating to shoot; I spent 20 minutes trying to get it out of the capsule, and failed. I've never not been able to get a coin out of a capsule before. The capsule screws up the focus just a mite and creates enough diffraction to keep me from getting a shot that I really like. Apparently it will take a clamp and an exacto blade to split the case.   |
| Are We Really Going To Bomb Iran? Posted: 15 Jan 2012 01:14 PM PST Just based on national balance sheets, 2012 will be somewhere between challenging and catastrophic. But debt and deficits might be the least of our near-term problems if Jim Rickards is right. In his latest King World News interview, he lays out a compelling case for yet another war:
Some thoughts For more details see this excellent report by Chris Martenson. In one sense this latest war is, if not right, at least understandable. A fight is clearly brewing and the US wants to both protect a valued ally and keep the oil flowing.* But in another sense it's absurd. Multiple simultaneous wars are for solvent superpowers with sound currencies and flexible finances, and the US no longer qualifies. Our military is overextended and exhausted and this year Washington will borrow its defense budget from China, add another trillion to the official national debt and maybe three trillion to unfunded liabilities and other off-balance-sheet but very real obligations. Austrian economics — and common sense — teach that the more leveraged the system the less able it is to withstand external shocks. And war in the Middle East sending oil to $200 would be the mother of all external shocks. $8-a-gallon gas would be like a gigantic tax increase, shifting the global economy back into reverse and preventing the peripheral Euro-zone countries, Japan and the US from getting their borrowing under control. Who will buy the extra trillion or so dollars of sovereign debt? The world's central banks, obviously, so the printing presses will run flat-out for the rest of the decade. The secondary effects are harder to predict but far scarier. The global financial system is hiding trillions of dollars of bad loans and nearly a quadrillion dollars of derivatives, which is another way of saying the developed world's biggest banks are ready to evaporate. Will the Fed and ECB be able to stop that avalanche when it comes? Who knows? It looks like we're back at square one in the inflation/deflation argument. * In response to some well-founded criticism (thanks guys), a reference in this paragraph to "crazies with nuclear weapons" was replaced with something less offensive and hopefully more accurate. |
| Posted: 15 Jan 2012 12:52 PM PST More thoughts on debt and the "Crisis in Capitalism." "Americans think we are stupid," said a European diplomat at a dinner party in Washington. "But we're not stupid. We're just working out the problems involved in forming what you might call 'a more perfect union.'" "Well, you can unify all you want...it won't make your debts go away," we replied. We always try to be a cheery presence at dinner parties...especially in Washington. "No...but it will make it easier for us to manage them, just as you do here. And by the way, the US has about the same amount of debt as Europe. The latest figures show the average of all OECD countries is about 100% of government debt to GDP. The US is right in the centre...right at the average." "Oh, don't think I'm holding the US up as a superior example. Not at all. To the contrary, I'm just pointing out that if Europe follows the US model, it will go broke just like the US." "Actually, there is some very intelligent and sophisticated thinking going on in Europe. I think you'd approve of it. We don't talk about it publicly, of course. Most people wouldn't understand. But we know that something very important has changed...and we are not at all sure how to respond to it. "No country has ever been able to work its way out of such high levels of debt without exceptionally strong rates of growth...and an exceptionally good set of circumstances that make it possible - such as very agreeable creditors who essentially forgive debt, as the US did after WWI and WWII. "And I don't see either of those things happening. The creditors can't forgive the debt...because they owe money too. They'd be broke too. And growth levels seem to have come down to negligible levels. If this continues, all our planning and all our efforts to 'build a more perfect union' will probably be for nothing." "I'm glad to see you thinking along those lines. But you're aware that this is not a problem that just appeared in the credit crisis of '08?" "Yes...we know it has been a long time coming. Ever since the end of the '30 glorious years' following WWII, real growth has been hard to get." "Exactly. In the US, the average man of working age earns about 20% less, in real terms, than he did in 1972. If he only went to high school and not college, he earns nearly 50% less." "In Europe, outside of Germany, the figures are similar...though not as bad, I believe." "Yes, it was possible for the US to reduce its WWII debt because it ran very high rates of real growth up until the '70s. Same thing in Europe. Since then, most of the improvement in living standards has been smoke and mirrors. In America, women went to work. More people working more hours. They were able to increase household income...while the quality of life at home generally went to Hell. Then, when they couldn't work any more hours, they began borrowing money. Then, their balance sheets went to Hell. That is the reason, and the only reason, for the boom of the Clinton...and later, Bush...years. It was a phony, unsustainable boom...with phony, unsustainable growth." "In Europe, it was a little different. People didn't want to work more. They wanted to work less. So they emphasised high wages....but fewer people had jobs. We learned to live with high unemployment. And governments borrowed to boost living standards for everyone - including those who didn't work." "But those days are over. Nobody - household or government - can continue to borrow to raise living standards. And without more real demand...and real spending...and real wealth...it's not possible to work your way out of so much debt." "Yes, this time capitalism really does seem to have failed us," our diplomat friend concluded. "Well, it looks that way. You have to ask... How is it possible that the most dynamic, best capitalised, most high-tech economy in world history could not add a single dollar to the real wealth of the average working man over a 40 year period?" More to come... Regards, Bill Bonner |
| Money Printing: The Ugly Truth Behind the “Good News” Posted: 15 Jan 2012 12:52 PM PST The news has been generally "good" ever since the European Central Bank made it clear that it will print money rather than see major banks or minor nations get what is coming to them. Like its US counterpart, the ECB will not permit a major bank or sovereign debtor to go bust. "ECB sees signs of let-up in debt crisis," is today's headline in The Financial Times. Let's see...the news report goes on to tell us that Spain and Italy were able to sell 22 billion euros of debt yesterday, proving that they can still finance their deficits...and that, therefore, we have nothing to worry about. To whom did they sell their bonds? We don't know, but we presume the buyers were banks who were investing money they got on favourable terms from the ECB. So, you see, dear reader, that their willingness to buy the debt does not necessarily mean that either buyer or lender is solvent. Probably, neither is... But with fears of a debt debacle in Europe off the front page headlines...the financial world has seemed rather benign, especially in America. US stocks have rallied since October. The latest unemployment report from the feds was surprisingly upbeat. The dollar is strong. And US consumers are now re-leveraging, going deeper into debt in order to buy things. Does this mean the Great Correction is over and done with? Nah... Europe is either already in recession...or entering recession. Leading indicators in the Old World are plunging sharply... Manufacturing in the US is softening... And European sales affect 20% of US corporate revenue... A strong dollar actually makes it harder for US companies to sell their products overseas, and it reduces the contribution made by foreign subsidiaries to US earnings reports. Oil, meanwhile, has remained near $100 despite a sell-off in commodities and "risk-on" assets. This leaves both business and consumers with little free cash to spend...and squeezed profit margins. Already, corporate profit margins are beginning to come down...as they should. The Fed came out with its "Beige Book" this week. Our reading of the report - which includes updates from 10 districts around the country - is that conditions haven't gotten any worse...but that they haven't gotten any better either. Most important, the two key ingredients in household wealth - wages and housing values - remain in a slump. None of the 10 districts reported much improvement in either area. So, even if consumers did go on a bit of a shopping spree over the holidays, it is unlikely to continue. Because there is nothing behind it. Remember, this time it IS different. This time there is nowhere to go but down. (More on that...below)... Households could increase their debt levels in the '80s, '90s and '00s only because 1) they began at a fairly modest level, and 2) housing prices were going up. While household debt has come back down to levels of the early '00s...they have a long way to go before they are back to the long-term averages of the '60s, '70s and '80s. As for employment, the latest numbers were better than they had been but hardly a sign of a real recovery. From the "WorkBlog" at The Washington Post: On Friday, we got the December jobs number: +200,000. That's good, but not good enough. I posted a graph from the Hamilton Project showing that, at that rate, the labour market wouldn't recover till 2024. But perhaps that's too pessimistic. The Economic Policy Institute took a look at the same numbers and concluded that a growth rate of 200,000 jobs per month would lead to a full recovery in seven years or so. That's nothing to celebrate, but it's better than the Hamilton Project's estimate of 12 years. It's also a bit odd: Isn't this a simple matter of taking job losses and dividing by monthly job gains? Well, no. The date of our eventual recovery depends on some crucial unknowables about the future of the American labour force. The blogger doesn't mention it, but even while the unemployment rate might go back to 'normal' in 7 to 12 years, the latest figures show US household income still going down. That's not going to do much for household budgets or purchasing power. Or their borrowing power, for that matter. Who's going to lend to households when both their ability to repay (their wages) and their collateral (their houses) are going down? And what are aging baby boomers going to retire on, if they continue to borrow against declining collateral? Our verdict: The higher borrowing and spending at the household level in December was a fluke, we believe, not a sustainable trend. The Great Correction continues... Regards, Bill Bonner |
| The Growing Energy and Oil Alliance Between China and Saudi Arabia Posted: 15 Jan 2012 12:48 PM PST The oil and energy alliance between China and Saudi Arabia has just been strengthened. On Saturday - in the wake of Europe's debt crisis - Saudi state oil company Aramco signed a deal with China's Sinopec to build an oil refinery in the Red Sea city of Yanbu. The refinery will process 400,000 barrels of oil per day, some of which will presumably end up in China. "Saudi Aramco will hold a 62.5 percent stake with Sinopec holding the balance in the venture that highlights China's growing role as an infrastructure developer in the oil rich kingdom," according to AFP. As an intriguing sidenote, Chinese Premier, Wen Jiabao - who made Saudi Arabia the first stop on his Middle East tour - signed a series of "agreements and cooperation programs" with Saudi King Abdullah. One of those was, "An agreement between the two governments on the peaceful usage of nuclear energy was also signed. Signatories for the two parties were Dr. Hashem Yamani, President of King Abdullah City for Atomic and Renewable Energy, and Chang Peng, President of the National Commission for Development and Reforms of China." Hmm. Isn't that interesting? This confirms our idea that thanks to America's shale gas revolution - which makes Middle East oil imports a lot less important to the United States - the Saudis are shopping for a new strategic patron in the region and the Chinese are keen to be that patron. Aramco CEO Khalid al-Falih said the deal "Represents a strategic partnership in the refining industry between one of the main energy producers in Saudi Arabia and one of the world's most important consumers." Meanwhile, closer to home, Australia is set to become the world's largest exporter of liquid natural gas (LNG). Japan's Inpex and France's Total gave their final investment sign off to the $34 billion Icthys LNG plant in Darwin. Japan is the world's largest consumer of LNG, mostly for its domestic power generation. Australia now has $175 billion in LNG developments. You can't have growth without energy. Excess credit growth is one way to "boost" growth artificially. But growth driven by credit creation just borrows consumption for the future. You end up with a huge debt overhang, low savings, and a tendency toward overconsumption - all of which makes new growth harder. This is the position Europe and America now find themselves in. Meanwhile, the strategic race for energy - the natural fuel for growth - is on. More on that below in an excerpt of a report I published last June to subscribers of Australian Wealth Gamelan.
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| Posted: 15 Jan 2012 12:47 PM PST Talk about an interesting contrast. There were two different but important investment stories over the weekend. But only one of them got any real press coverage. Not surprisingly, the one that didn't get much coverage is the story that could make 2012 a much better year for Aussie investors than 2011. But for old time's sake, let's start with the old news. Europe is sinking. On Friday the 13th, Standard and Poor's cut the credit ratings of nine European countries. S&P's biggest scalp was France. France has lost its AAA credit rating and been put on a "negative outlook"; the financial equivalent of the naughty corner. The downgrades weren't all that surprising. After all, on December 5th 2011, S&P warned the Europeans to get their divided house in order. Almost nothing constructive or helpful to solve Europe's debt problem has happened since then. In the currency markets, the euro made new lows against the Australian dollar. In its Friday announcement S&P said, "Today's rating actions are primarily driven by our assessment that the policy initiatives that have been taken by European policy makers in recent weeks may be insufficient to fully address ongoing systemic stresses in the euro zone." You don't say? Austria was also relieved of its AAA rating in Friday's action. This poses a problem for Europe's bailout fund, the European Financial Stability Facility (EFSF). France and Austria have signed up to provide about €180 billion to the EFSF. Subtract €180 from €440 (the original total funding of the EFSF) and you get €260 billion - the current capacity of the fund minus French and Austrian contributions. Remember, though, that the EFSF is already on the hook for contributing €130 billion to the second Greek bailout (because the first bailout of €109 billion worked so well). That would leave the fund with €130 billion to bail out the rest of Europe, which hardly seems like enough at this point. It won't be long before the EFSF has its own credit rating cut. Incidentally, the Greek's had their own mini-crisis on Friday. The Greek government is in talks with private creditors to restructure Greek debt. Because creditors are talking about taking a voluntary 50% loss on their government bonds, a deal would not result in a technical default. It would, however, reduce Greece's total government debt by about €100 billion and unlock the next €130 billion in bailout funds. The trouble is, talks between Greece and its creditors broke down on Friday. A large chunk of Greek debt matures in mid-March. But it's possible the Greeks could default before then. That would certainly spice things up. And in any event, even if the current restructuring deal is reached, it would only reduce Greek debt from 160% of GDP to 120% of GDP. In other words, the Greeks - and all of Europe - still have the problem of how to grow out of decades of Welfare State debt. This is especially hard when the Welfare State and the common currency have rendered huge parts of southern Europe economically uncompetitive, with high youth unemployment, poor demographics, and large government debt burdens. You've heard all that before, though. In fact, all of this is old news for the equity market, which is why we don't expect the Aussie market to react much today. We could be wrong, of course. But Italian and Spanish banks were down last week in anticipation of the S&P action. What's more, the Long Term Refinancing Operation (LTRO) by the European Central Bank (ECB) late last year was designed to make the EFSF less important. How? The ECB hopes that if banks can refinance long-term loans for 36 months with the ECB, it will ease liquidity concerns in Europe's banking system. That might inspire the banks and private investors to buy up government bonds. And you don't need a bailout mechanism (EFSF) if the banks and private investors are willing to buy European government bonds again. But why would you buy European government bonds right now? You wouldn't! You'd rather invest in the asset class that's going to be behind the next 50 years of growth. It's not debt. It's energy. Just ask the Chinese and the Saudis. Regards, Dan Dennning |
| Posted: 15 Jan 2012 12:02 PM PST 01/14/2012  GLD – on buy signal. SLV – on buy signal. GDX – on buy signal. Summary Disclosure End of update
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| If You Are A Blue Collar Worker In America You Are An Endangered Species Posted: 15 Jan 2012 11:18 AM PST 
Once upon a time, almost everyone who wanted a job in America could get one. If you go back a few decades, you will find that about 95 percent of all men between the ages of 25 and 54 had a job. Today that figure is struggling to stay above 80 percent. If you are a blue collar worker in America, you are simply not valued. Your bosses are constantly trying to think of ways to replace you or send your job overseas. According to Reuters, 23.7 million American workers are either unemployed or underemployed right now. The more "blue collar" you are, the more likely you are to be unemployed. The following chart that shows the unemployment rate during 2010 broken down by level of education comes from the Bureau of Labor Statistics....
If you are an unskilled worker in America today, you simply are not needed. Yes, once upon a time nearly anyone could go out and get a factory job, but those days are over. Neither major political party seems the least bit interested in trying to keep manufacturing jobs in America. Back in the year 2000, more than 20 percent of all jobs in America were manufacturing jobs. Today, about 5 percent of all jobs in America are manufacturing jobs. To have that huge of a shift in a little over a decade is absolutely mind blowing. Many Americans had been hoping that Barack Obama would stand up for the working man like he promised to do. But just like so many of Obama's other promises, that one was totally worthless as well. The Obama administration has been pushing hard for even more "free trade" deals that will allow big corporations to ship even more of our jobs out of the country. The Obama administration simply does not value blue collar jobs at all. In fact, U.S. Trade Representative Ron Kirk is running around telling the press that there are lots of things that "we don't want to make in America" anymore. If you are a blue collar worker, Barack Obama does not care about you. He never cared about you. In fact, the vast majority of the politicians in both major political parties do not care about you. What they do care about is winning elections and taking care of the big donors that keep helping them win elections. Many of those donors are systematically shipping huge numbers of our jobs overseas. In addition, now that labor has become a "global commodity", wages for the jobs that remain in America are being steadily driven lower. A recent White House reported entitled "Investing in America: Building an Economy That Lasts" actually bragged that our trade policies have driven wages in America down. The following chart is from that report....
We were told that the "one world economy" would be great for America, but the truth is that it has only been great for the giant corporations. For the average working man, it has been a disaster. But we should have all seen this coming. It didn't take a genius to figure out what was going to happen once you put American workers into the same labor pool as slave laborers on the other side of the world. After all, what greedy corporate executive really wants to pay U.S. workers ten to twenty times as much compensation just because it is the "right" thing to do? Today, formerly great cities all over America are being transformed into hellholes while shiny, new industrial cities are popping up all over China. For example, a couple of decades ago the Chinese city of Shenzhen was a sleepy little fishing town. In 2012, it is a teeming metropolis of over 13 million people. Foxconn (the builder of iPhones, iPads and many other products that we buy) runs a factory in Shenzhen that employs over 400,000 people. Most of those people work for about a dollar an hour. A recent article posted on Business Insider described the incredibly long hours and the nightmarish working conditions that those workers must endure. The following is a brief excerpt from that article....
At Foxconn, they don't really care about the health and safety of the workers. Workers are expected to do the same repetitive tasks as rapidly as they can for as long as they can. When their bodies break down, they are fired....
But the Obama administration insists that allowing big corporations to ship our jobs over to countries with working conditions like that is "good for the economy". Well, it might be good for the profits of the largest corporations, but it is a total nightmare for the rest of us. Just consider the following stats.... *The United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001. *Between December 2000 and December 2010, 38 percent of the manufacturing jobs in Ohio were lost, 42 percent of the manufacturing jobs in North Carolina were lost and 48 percent of the manufacturing jobs in Michigan were lost. *According to U.S. Representative Betty Sutton, America has lost an average of 15 manufacturing facilities a day over the last 10 years. During 2010 it got even worse. Last year, an average of 23 manufacturing facilities a day shut down in the United States. *In all, more than 56,000 manufacturing facilities in the United States have shut down since 2001. *According to one study, between 1969 and 2009 the median wages earned by American men between the ages of 30 and 50 dropped by 27 percent after you account for inflation. *According to Professor Alan Blinder of Princeton University, 40 million more U.S. jobs could be sent offshore over the next two decades. Are you starting to get the picture? If you are a blue collar worker that cannot find a job, it is not because you have failed as a human being. Rather, the truth is that you cannot find a job because of the failed trade policies of the federal government. We are experiencing the bitter fruit of a "one world economy". Globalization was never intended to make the lives of American workers better, and now many are finally waking up and realizing this. Hopefully, as Americans wake up on these issues they will fight to turn this nation in a more positive direction. Unfortunately, way too many Americans are giving up hope completely. The following comes from a recent article in the Guardian....
As I have written about so many times, we are watching the middle class in America be systematically destroyed. The economy is not getting better. There may be moments when the economy seems like it is improving, but the reality is that we are mired in a nightmarish long-term decline. If you are not yet convinced of this, please see this article and this article. Even those running our economy are saying that things are not going to be getting much better any time soon. For example, the President of the Federal Reserve Bank of Chicago, Charles Evans, recently admitted that the employment picture is not going to be much brighter than it is now by the end of 2012. He recently said that "at the end of the year, we're not going to be very different from 8.5 percent unemployment." And remember - history has shown us that most pronouncements by Federal Reserve officials are usually far too optimistic. If you are a blue collar worker in America, there is simply not too much to be optimistic about right now. You might want to think about how you and your family are going to survive without any work. The millions of jobs that have been sent overseas are not coming back. Even if you still have a decent job, now is the time to be developing a side business or developing other alternative streams of income. What you don't want to do is to just sit there and hope that somehow things will "magically" turn around if we just vote in the "right" politician. If you want to get a really good idea of what is really going on with the U.S. economy right now, just go tour some of the formerly great industrial cities in the "Rust Belt". In Cuyahoga County, Ohio one out of every five houses is sitting vacant. It is not that those homes are not needed - it is just that there are not nearly enough people with good jobs available to buy up all of the foreclosures. So thousands of perfectly good houses are being torn down. The following comes from a recent CBS News report by Scott Pelley....
Can you imagine that? 20,000 homes being demolished in one county alone? Of course Detroit is in even worse shape than Cleveland. If you can believe it, the median price of a home in Detroit is now just $6000. For much more on all of this, please read my recent article entitled "Formerly Great Cities All Over America Are Turning Into Open, Festering Sores". It would be great if I could tell you that hope is just around the corner, but it is not. The plight of the blue collar worker in America is going to get worse and worse. But just because blue collar workers in America are an endangered species does not mean that you have to be a victim. We should all seek to become less dependent on the system. If you are completely and totally dependent on having a "job" (just over broke), then you have put yourself in a very vulnerable position. That job could disappear at any moment. Over the next few years, the number of good jobs is going to continue to decrease. Things are going to be really tough. But those that have prepared and that have tried to become more independent are going to be in much better shape than those that have not. |
| When Your Broker Dealer Goes Bankrupt Posted: 15 Jan 2012 10:53 AM PST How To Protect Your Stock Investments In The Event Your Broker Dealer Goes Bankrupt from Tekoa Da Silva's Bull Market Thinking:
The reason I began researching and ultimately put this paper together was simple: fear. As a stock investor, I became afraid to continue holding my stock investments in the financial system. My investigations into this matter were both shocking and relieving as I've previously reported, for the reason that all the financial "safe guards" to protect investors from losses are flimsy at best. I'm indirectly referring to the SIPC when I say that by the way. I discovered that in the economic "good times", the SIPC carries around a billion dollars in capital, which is raised from annual member company dues. But in bad economic times such as we're in now, member companies go bankrupt and many fall behind in their annual contributions–while at the same time broker bankruptcies increase, putting a tightening financial noose on the entire organization. Easily Severing Broker Dealer Counter Party Risk and Removing Your Shares From The Financial System Continue reading @ BullMarketThinking.com |
| What If Your Broker Goes Bust? Posted: 15 Jan 2012 10:51 AM PST by John Rubino, DollarCollapse.com:
And now that MF Global has crashed and taken its customers' money with it, we're faced with the possibility that even if our stocks go up, the accounts they're in might disappear without a trace. So yeah, it's harder than it used to be. On this last point, there's clearly a market for advice on how to minimize brokerage account risk, and BullMarketThinking's Tekoa Da Silva has has just published a report, "Bulletproof Your Shares", that does a good job of explaining the various alternatives. The report sells for $44.95, but he's graciously allowed DollarCollapse to post a few excerpts: Read More @ DollarCollapse.com |
When it comes to picking gold mining names in the current market environment, John Stephenson, author and portfolio fund manager at First Asset Investment Management, believes that buying the "best of breed" is the way to go. In this exclusive interview with The Gold Report, he explains his reasoning in light of how the current global economic environment is affecting prospects for the metals markets and valuations of mining company stocks. He also talks about his favorite picks in a range of three production classes and why he likes them.
Deeply bothered by the MF Global(MFG) collapse, I spent the entire month of December researching a report which I've now released, entitled, 
If investing seems harder than it used to, you're not imagining things. U.S. stocks are down from a decade ago, the gold/silver miners haven't kept up with the underlying metals, and though Treasury bonds have done pretty well, only a lunatic would count on them going forward.| You are subscribed to email updates from Gold World News Flash 2 To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
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