Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
MarketSmartNewsletter.com
Dec. 5, 2013
THIRD CANADIAN TELECOM EVALUATING VALDOR SPLITTER
Vancouver, B.C. – December 5, 2013: Valdor Technology International Inc. (“Valdor”) (TSX-V: VTI) is pleased to report that Valdor’s operating subsidiary, Valdor Fiber Optics, Inc., has delivered a Valdor harsh environment fibre optic splitter to a third Canadian telecom company. The splitter will be evaluated by this telecom to determine if it is a solution for their on-going communication challenges.
Mr. Ron Boyce, VP Sales & Marketing/Director, states: “We are extremely pleased that a third Canadian telecom has requested our harsh environment splitter for their evaluation. The feedback I’m getting, from the Canadian telecoms, is that they are focusing on reliability and integrity of their networks; the fact that three Canadian telecoms are looking to Valdor for product reflects very well on Valdor quality control. Valdor’s splitters are expected to meet and exceed this telecom’s technical requirements. We now have one Canadian telecom populating their network with Valdor splitters and two more giving consideration to doing the same. ”
There are ten regional and national telecoms in Canada; ranging from the government owned SaskTel to the national and publically owned Bell Canada. Currently, the telecom fibre-to-the-home (FTTH) market accounts for about 80% of global fibre optic expenditures. In North America FTTH is at about only 5% penetration. For the vendor, the telecom market is a difficult one to penetrate due to its extensive requirements for high quality products and services. It is estimated that the telecom market for passive and active FTTH products, for Canada only, will be in excess of $300 million/year, for at least the next five years. The telecom FTTH market is much larger in the USA.
About the Fibre Optics Industry: Fibre optics is the future of communications. The signal transmission business is in the early stages of a fibre optics bull market. All signal transmission, in their many and various forms, are being converted from electrical to fibre optics. A comprehensive global report on the fibre optic components market projects that it will reach US$42 billion by the year 2017.
About Valdor Technology International Inc. (www.valdortech.com): Valdor is a high technology fibre optic components company specializing in the design and manufacture of fibre optic connectors, laser pigtails, splitters, and other optical and optoelectronic components, including some that use the Valdor proprietary and patented Impact Mount™ technology. Valdor specializes in harsh environment products and in particular splitters and connectors. The Valdor business plan incorporates growth by acquisition.
For information on Valdor’s product lines please visit www.valdor.com.
ON BEHALF OF THE BOARD OF DIRECTORS
OF VALDOR TECHNOLOGY INTERNATIONAL INC.
The TSX Venture Exchange has not reviewed and does not accept responsibility
for the adequacy or accuracy of this news release.
Click the links below for more information on Valdor Technology:
Valdor Corporate Video
“Valdor markets a complete line of passive fiber optic products. This video addresses only the Valdor signature products that were developed exclusively by and for Valdor and that have proprietary and/or patent protection.”
www.valdortech.com - TSX.V:VTI VTIFF:US
Investor Relations:
MarketSmart Communications Inc.
Click Here For Contact Info
Valdor Canadian Office:
Brian Findlay
Elston Johnston
Click Here For Contact Info
Disclaimer: MarketSmart Communications. was paid to distribute this bulletin. MarketSmart Communications may or may not own securities in this particular company. This is not a recommendation to buy or sell any securities. Although results are possible, they are not guaranteed. Please be aware that MarketSmart Communications Inc. is a news service and NOT an investment advisory service; it is advised that you consult with a licensed financial adviser before making any investment decisions. This publication does not provide an analysis of a company's financial position and the information herein should NOT be construed as an offer to buy or sell securities. The information herein is taken from sources thought to be accurate, but there is no guarantee. All due diligence should be done by the reader or their financial adviser. Investing in securities is speculative and carries risk. You are on this mailing list because you have signed up to receive information from a current or previous client/affiliate of MarketSmart Communications. Past performance of Companies mentioned does not guarantee future performance. This email complies with the US Federal CAN-SPAM Act of 2003
For more information about MarketSmart Communications click here
MarketSmart Communications
744 West Hastings St, Vancouver, British Columbia, V6C 1A5
Bitcoins: A Fully-Compliant Currency The Government Can Love
Dec. 6, 2013
I’m finishing up a novel, a piece of speculative fiction in a genre you could call “economic-thriller”.
The Mark of the Beast?
In the book, the dollar crashes in a hyperinflationary fire (natch), replaced by a new currency called the american. The exchange rate at the time of the changeover is $1,000 equals ?1. To illustrate its purchasing power, ?1 buys you a candy bar.
However, americans don’t exist as physical currency. There are no “american bills” like there are dollar bills, and no coins either. Instead, americans are a fully digital currency: They exist in the ether. You need a card—be it a credit card, debit card, or EBT card—to spend americans. And to receive americans, either from employers, customers, government, etc., you need a “central account” which is tethered to your Social Security number.
The rationale for these measures is convenience—but the implication is, no one can earn, save or spend money without the government being aware of exactly what you are doing.
Since the government can easily access all your spending and earning of americans, no one can launder money, or evade taxes, or even so much as fail to pay all their bills on time. Law-makers and politicians and pundits say it’s no big deal that the government will know everything about the citizen’s finances, because, “If you’re not doing anything wrong, you’ve got nothing to hide! If you’re paying all your bills and your taxes and your loans, you got nothing to worry about!”
Another feature of this virtual currency: With americans, you can never again be late with your bills. Payments you have to make are automatically deducted from your central account. And if you take out a loan for whatever purpose, not only is that information in your central account, but your ability to spend money is automatically prioritized: Taxes get paid first, followed by private loans, then bills, then food, then “etc.”
In the novel, law-makers use this compulsory “compliance” as a selling point for the american. “Think of the convenience! No more worrying about paying your bills—your bills are all paid for you!”
However, if you don’t have enough money for “etc.”—entertainment, booze, an ice-cream sundae with the kids, what have you—you don’t get any. And if after paying off your loans and bills there isn’t enough left over for food—then no food for you. Ditto with bills: No money for electricity, or water, or heat? Then no electricity, or water, or heat for you. And if perchance you can’t fully pay off your loans, then you are declared in “non-compliance”. And if you can’t pay off your taxes, then you are charged as being in “criminal non-compliance”—and then woe is you.
In the language of the novel, it is a “fully-compliant currency”—and it forces the people to be “fully-compliant citizens” of the dictates of the government and the banksters.
This is of course a fiction I invented for my upcoming novel—but I couldn’t help notice how lawmakers and banks are all of a sudden getting on the bitcoin bandwagon.
For something that was supposed to be a threat to the established order, which is what bitcoin and the other cryptocurrencies promised to be, the established order sure seems to be happy with it: The U.S. Senate hearings on bitcoins were pretty much of a success for bitcoins, and banks are starting to throw nothing but love in bitcoin’s direction. The mainstream media isn’t putting down bitcoins, as it did a few years back.
In short, and unlike what a lot of cryptocurrency proselytizers have been saying—that the powers that be would be against bitcoins—the establishment seems to be fully in favor—or at least accepting—of bitcoins.
Makes you go Hmm . . ., now doesn’t it?
Me, I've already explained here and here why I think that bitcoins are in a bubble, and why bitcoins and other cryptocurrencies will never be currencies per se, only an asset class. My thinking is, cryptocurrencies represent a new class of assets whose value is highly unstable so long as they are not actually tethered to some good or service people both need to buy and have to sell. Until that day happens, cryptocurrencies are nothing but speculative investments that can plummet to zero at a moment’s notice.
However, thinking about cryptocurrencies from the point of view of the Federal Reserve, or a senator on the Banking Committee, or a trader at a bank’s prop desk, cryptocurrencies such as bitcoin have a lot of advantages—they’re not something to be dismissed out of hand.
All of bitcoin’s benefits to the establishment revolve around its blockchain.
In simple terms, a blockchain is a registry of all transactions carried out in bitcoins. Thus is resolved the problem of double-spending one particular bitcoin: It can’t be done (at least in theory) due to the blockchain.
But the blockchain is in fact a register—a trail—of bitcoins. So it’s a relative cinch to piece together each and every transaction of any particular wallet in the bitcoin universe. And since exchanges need detailed personal information about a bitcoin user in order to comply with money-laundering laws before issuing a new user with a wallet, the government or other interested parties could determine what any one particular person has been doing in the bitcoin marketplace.
In other words: Imagine that the government knew each and every cent you earned and spent, without a single exception.
That cannot be done with dollars, at least not easily. The dollar’s inefficiencies when compared to bitcoin or any other cryptocurrency are exactly what make tracking dollar transactions so hard. That’s why money-laundering in fact exists: Criminals are taking advantage of inefficiencies in the dollar to hide their profits and thus not get caught.
But with bitcoins as they currently exist, it is a snap to keep people compliant. Once some simple baseline limitations are imposed on users of bitcoins—such as the rules implemented by exchanges so as to comply with money-laundering laws—a user’s transactions are as transparent as glass.
Which is what a government would want, in order to get every bit of tax revenue it wants. Which is what a bank would want, in order to properly gauge the risk of a loan it is extending, and thereby maximize its profits.
Not only that, being able to track people’s spending completely, in real time, as can be done with bitcoin and conceivably every cryptocurrency, the government could easily rescind someone’s ability to earn money.
Witness how the government shut off WikiLeaks’ source of funding—took them less than a week. WikiLeaks depended exclusively on donations made via credit card payments—so by “encouraging” the credit card companies, Visa and Mastercard, to refuse to process donations to the organization, the U.S. government shut down Wikileaks just days after the first big document leaks of 2010.
With bitcoin or some similar cryptocurrency, the government wouldn't even need to take the step of contacting credi card companies to “encourage them to do the right thing”: The government could simply make any payment to a targeted group invalid. (And perhaps get a notice of whoever it was who donated to the targeted group?)
All this is to say, bitcoins and other cryptocurrencies are potentially a great step forward for a government looking to impose a Panopticon society on the American people. We can’t travel without TSA’s approval, so why not extend that power to people’s ability to interact in the economy as well? Due to the fact that, with bitcoins, there is a trail from people to their bitcoin wallet to their bitcoin usage, a trail that is relatively easy to read, the government could have this power over each and every citizen—the power to monitor and control our interactions with the economy.
Which is why bitcoin—far from being a threat—might just prove to be the fully-compliant currency the U.S. government can come to love. A currency that will let it have unfettered access to each and every financial transaction you carry out.
Is that something that we as a people want? More power to the government? Because that’s the promise of bitcoin.
———————
P.S.: In case you’re wondering, the novel is going to be called A Secret History of the American Crash. I expect to have it finished in a couple of months.
For kicks: Insert ?! at the beginning or end of your comment. If I get fifty comments with such a secret mark, I’ll post the first fifty pages for free, in both Kindle and EPUB formats. Deal?
http://gonzalolira.blogspot.com/2013/12/bitcoins-fully-compliant-currency.html
Yuan May Hold Key To Chinese Territorial Expansion
Dec 6, 2013
Steve Cochran
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
China's recent declaration of an "air defense zone" over the Japanese-held Senkoku Islands in the East China Sea has become the latest flashpoint in the expansionist policy in the West Pacific that it has pursued for decades. China has already won a victory of sorts by getting the world to treat the islands as "disputed territory," since Japan has been the only nation to occupy them, claiming them in 1895. China never contested Japanese ownership until 1971, when possible petroleum reserves were discovered there. China has gone so far as to alter old Chinese maps that show the islands as Japanese.
This is the standard procedure China has used to expand its territory since 1949. It makes small, incremental incursions, no single one egregious enough to go to war over, until it has achieved its territorial goals. China claims 80% of the South China Sea. If allowed to enforce those claims, they will control shipping routes through which over half the world's merchant tonnage and one-third of the world's oil tonnage passes.
China seized the Paracel islands from Vietnam in 1974, killing over 70 Vietnamese soldiers, then attacked Vietnam's possessions in the Spratlys in 1988, killing 60 Vietnamese sailors. China has recently built a town on Woody Island in the Paracels it named Sansha City, installing a civilian government it claims has authority over all the Paracel and Spratly Islands. Chinese patrol craft based there chase out any foreign fishing boats.
China has been only slightly less aggressive in its seizures of islands off the Philippine coast. Chinese coast guard vessels now patrol Scarborough Shoal , and have erected barriers to prevent Philippine fishing boats from anchoring there. A spokeswoman for China's Foreign Ministry told Reuters,
"The Scarborough Shoal is indisputably part of China's territory, and China will ensure that its sovereignty over this area is not being violated."
China's goal is not only energy self-sufficiency, but remote naval bases for its expanding navy, so that it isn't hemmed in by Japan and Taiwan.
As many analysts note, nothing China does is spontaneous. Every action on the international stage has been planned years before. Therefore, it knows it needs to convince the U.S. to continue allowing Chinese expansion in the South China Sea. Since the PLA Navy has no chance of bullying the U.S. Pacific Fleet as it does its smaller neighbors, any pressure will have to be economic. This means reducing the international power of the dollar, while building the yuan into the new reserve currency.
One way to enhance the yuan is to open currency bourses in major trading hubs, such as Singapore and London. This is exactly what China has done. This facilitates international trade in commodities using yuan instead of dollars. This makes it easier for China sign up its major sources of raw materials, such as Australia, to bilateral agreements to denominate trade in yuan. Agreeing to trade with China in yuan cuts the dollar out as a middle step, therefore reducing demand for dollars. Since China is the world's leading consumer of base metals (as well as many other commodities,) convincing trading partners to ditch the dollar is not a very hard sell.
China is also the largest oil importer in the world. Since oil is also traded in dollars, it provides major demand and support for the dollar. To combat that, the Shanghai Futures Exchange is planning to offer crude oil futures denominated in yuan, and using the medium sour crude that China favors as the benchmark. There are some oil-producing nations that would be happy to reduce the importance of the petrodollar, and may sign on.
China is both the #1 producer and at the same time the #1 importer of gold. Again, these commodities are traded in dollars, forcing the Chinese to buy dollars. To reduce its vulnerability to U.S. debt, China is looking to expand its central bank gold reserves. To that end, it has financed the purchase of many foreign gold and base metal mines in Asia, Africa and Latin America. The Chinese government has bankrolled $4 billion in loans to Chinese companies in two years just on gold mine acquisitions, mostly in Australia (which whom it has a yuan trading agreement.) The gold produced in these mines goes straight to China, and never sees the open market. With enough gold production under its control, China can move the focus of the gold trade to Hong Kong or Shanghai, and dictate that gold contracts be denominated in yuan.
Since government bank reserve figures are a state secret, no one knows how much gold the Peoples Bank of China is storing, but domestic demand cannot account for all the gold flowing into the country. It is surmised that the Chinese government is using gold to replace U.S. Treasury debt in its central bank reserves, and recent pronouncements by top officials that "It is no longer in China's favor to accumulate foreign-exchange reserves" signal a reduction in both foreign bond and dollar purchases.
This will weaken the dollar and strengthen the yuan. The ultimate goal is to be formally included as a reserve currency by the IMF. To qualify, the yuan has to be fully-convertible. Last week's announcement of allowing market forces more say in the yuan's value by expanding its allowed trading range, moves it another step towards that goal. One trader noted,
"Once convertibility is achieved, reserve managers will flock to the yuan as an additional reserve currency. Its position will take market share away from other, overweight reserve currencies, most notably the U.S. dollar."
China's efforts are starting to bear fruit. The yuan replaced the euro as the second-largest international trade currency last month, but is still used in less than 9% of all global transactions. (The dollar stands at 81%.) The Chairman of China's central bank isn't standing still, announcing that he is going to "pull out all stops to deepen financial sector reforms"in its goal to make the yuan "basically convertible" in two years.
When that happens, the world will have a partially gold-backed reserve currency independent of the dollar, and a China with no compelling reason to buy or support dollars or U.S. debt. The U.S. will be far less likely to oppose Chinese expansion into the Southwest Pacific, as it will not want to provoke China into boycotting U.S. Treasury bond sales.
How can investors position themselves in preparation? Once the yuan becomes convertible, it is expected that the Chinese will reveal the extent of their gold reserves. It will then be in China's interest to support gold, as it will constitute part of the yuan's backing as a reserve currency. The revelation will probably get investors in the West noticing how much international trade is being conducted in yuan. They will also notice just how much gold production China controls, and that it is not reaching the open market.
This should prove supportive for gold, not only for the spotlight these moves will focus on the precious metal, but also because the dollar will weaken from reduced demand. Even if, in the future, gold has its price set in yuan, American investors will still be buying in dollars.
http://seekingalpha.com/article/1883231-yuan-may-hold-key-to-chinese-territorial-expansion
Yuan May Hold Key To Chinese Territorial Expansion
Dec 6 2013, 16:41
Steve Cochran
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
China's recent declaration of an "air defense zone" over the Japanese-held Senkoku Islands in the East China Sea has become the latest flashpoint in the expansionist policy in the West Pacific that it has pursued for decades. China has already won a victory of sorts by getting the world to treat the islands as "disputed territory," since Japan has been the only nation to occupy them, claiming them in 1895. China never contested Japanese ownership until 1971, when possible petroleum reserves were discovered there. China has gone so far as to alter old Chinese maps that show the islands as Japanese.
This is the standard procedure China has used to expand its territory since 1949. It makes small, incremental incursions, no single one egregious enough to go to war over, until it has achieved its territorial goals. China claims 80% of the South China Sea. If allowed to enforce those claims, they will control shipping routes through which over half the world's merchant tonnage and one-third of the world's oil tonnage passes.
China seized the Paracel islands from Vietnam in 1974, killing over 70 Vietnamese soldiers, then attacked Vietnam's possessions in the Spratlys in 1988, killing 60 Vietnamese sailors. China has recently built a town on Woody Island in the Paracels it named Sansha City, installing a civilian government it claims has authority over all the Paracel and Spratly Islands. Chinese patrol craft based there chase out any foreign fishing boats.
China has been only slightly less aggressive in its seizures of islands off the Philippine coast. Chinese coast guard vessels now patrol Scarborough Shoal , and have erected barriers to prevent Philippine fishing boats from anchoring there. A spokeswoman for China's Foreign Ministry told Reuters,
"The Scarborough Shoal is indisputably part of China's territory, and China will ensure that its sovereignty over this area is not being violated."
China's goal is not only energy self-sufficiency, but remote naval bases for its expanding navy, so that it isn't hemmed in by Japan and Taiwan.
As many analysts note, nothing China does is spontaneous. Every action on the international stage has been planned years before. Therefore, it knows it needs to convince the U.S. to continue allowing Chinese expansion in the South China Sea. Since the PLA Navy has no chance of bullying the U.S. Pacific Fleet as it does its smaller neighbors, any pressure will have to be economic. This means reducing the international power of the dollar, while building the yuan into the new reserve currency.
One way to enhance the yuan is to open currency bourses in major trading hubs, such as Singapore and London. This is exactly what China has done. This facilitates international trade in commodities using yuan instead of dollars. This makes it easier for China sign up its major sources of raw materials, such as Australia, to bilateral agreements to denominate trade in yuan. Agreeing to trade with China in yuan cuts the dollar out as a middle step, therefore reducing demand for dollars. Since China is the world's leading consumer of base metals (as well as many other commodities,) convincing trading partners to ditch the dollar is not a very hard sell.
China is also the largest oil importer in the world. Since oil is also traded in dollars, it provides major demand and support for the dollar. To combat that, the Shanghai Futures Exchange is planning to offer crude oil futures denominated in yuan, and using the medium sour crude that China favors as the benchmark. There are some oil-producing nations that would be happy to reduce the importance of the petrodollar, and may sign on.
China is both the #1 producer and at the same time the #1 importer of gold. Again, these commodities are traded in dollars, forcing the Chinese to buy dollars. To reduce its vulnerability to U.S. debt, China is looking to expand its central bank gold reserves. To that end, it has financed the purchase of many foreign gold and base metal mines in Asia, Africa and Latin America. The Chinese government has bankrolled $4 billion in loans to Chinese companies in two years just on gold mine acquisitions, mostly in Australia (which whom it has a yuan trading agreement.) The gold produced in these mines goes straight to China, and never sees the open market. With enough gold production under its control, China can move the focus of the gold trade to Hong Kong or Shanghai, and dictate that gold contracts be denominated in yuan.
Since government bank reserve figures are a state secret, no one knows how much gold the Peoples Bank of China is storing, but domestic demand cannot account for all the gold flowing into the country. It is surmised that the Chinese government is using gold to replace U.S. Treasury debt in its central bank reserves, and recent pronouncements by top officials that "It is no longer in China's favor to accumulate foreign-exchange reserves" signal a reduction in both foreign bond and dollar purchases.
This will weaken the dollar and strengthen the yuan. The ultimate goal is to be formally included as a reserve currency by the IMF. To qualify, the yuan has to be fully-convertible. Last week's announcement of allowing market forces more say in the yuan's value by expanding its allowed trading range, moves it another step towards that goal. One trader noted,
"Once convertibility is achieved, reserve managers will flock to the yuan as an additional reserve currency. Its position will take market share away from other, overweight reserve currencies, most notably the U.S. dollar."
China's efforts are starting to bear fruit. The yuan replaced the euro as the second-largest international trade currency last month, but is still used in less than 9% of all global transactions. (The dollar stands at 81%.) The Chairman of China's central bank isn't standing still, announcing that he is going to "pull out all stops to deepen financial sector reforms"in its goal to make the yuan "basically convertible" in two years.
When that happens, the world will have a partially gold-backed reserve currency independent of the dollar, and a China with no compelling reason to buy or support dollars or U.S. debt. The U.S. will be far less likely to oppose Chinese expansion into the Southwest Pacific, as it will not want to provoke China into boycotting U.S. Treasury bond sales.
How can investors position themselves in preparation? Once the yuan becomes convertible, it is expected that the Chinese will reveal the extent of their gold reserves. It will then be in China's interest to support gold, as it will constitute part of the yuan's backing as a reserve currency. The revelation will probably get investors in the West noticing how much international trade is being conducted in yuan. They will also notice just how much gold production China controls, and that it is not reaching the open market.
This should prove supportive for gold, not only for the spotlight these moves will focus on the precious metal, but also because the dollar will weaken from reduced demand. Even if, in the future, gold has its price set in yuan, American investors will still be buying in dollars.
http://seekingalpha.com/article/1883231-yuan-may-hold-key-to-chinese-territorial-expansion
Three Charts Obama Hopes You'll Never See
By KEITH FITZ-GERALD, Chief Investment Strategist
Money Morning
December 5, 2013
Today I'm going to show you three charts Obama hoped you'd never see.
Brace yourself.
You're about to get a very different view of the "recovery" picture that the administration keeps painting for us.
This one, for starters, is accurate.
It also explains why incoming Fed Chair Janet Yellen can't cut stimulus, which is one of the reasons you have an opportunity to make some money here... especially if you follow my "mid-December plan." More on that in a minute.
Let's start with the charts...
The White House positively hates this first one...
Charted Truth No. 1
U.S. payrolls are 1.5 million jobs short of where they were in 2008, and the "partimeification" of America continues unabated.
[img][/img]
Yes, the White House hates this chart, because it shows - in excruciating detail - that the recovery they keep trying to convince the rest of us is happening is little more than a complete evisceration of our labor base.
At a time when we should be seeing robust growth, what we're seeing is a huge percentage of productive workers shunted to the sidelines. Actual unemployment is more likely 14% to 17% if you factor in the under-employed and those who have given up looking for work.
Yellen's already tipped her hand in this department, incidentally, noting that "below average" employment is reason enough to prevent her from raising interest rates - and, presumably, from tanking the stock markets.
Given that the Fed's current two-pronged mandate emphasizes employment over inflation, she'll hammer on this notion until the numbers either move the way she wants or somebody can manipulate them to match reality.
Charted Truth No. 2
Employee compensation as a percent of GDP is down to the lowest levels ever recorded.
This is another chart that fairy-dusted federal policy makers don't want made widespread knowledge.
The White House is trying desperately to convince the American public that things are improving, as are politicians from both parties who are anxious not to lose their seats at a time when trust in their abilities has dropped to all-time lows.
Despite having spent trillions on liquidity injections, average workers are getting squeezed harder than ever before. So while profitability is now at record levels - with the average S&P 500 company generating 9.9 cents per sales dollar, according to Bloomberg - compensation is headed for the basement.
Decades of shoddy economic policy are coming home to roost, and there's not a damn thing they've done about it except serve up their own self-interested legislation while selling mainstream America down the river.
Not only are huge swaths of workers being "partimeified" in an effort to further boost margins, but wages are falling well behind GDP growth. According to the Bureau of Economic Analysis, as reported by Bloomberg, the ratio of U.S. wages to earnings is a mere 3.2 as of Q2 2013... and falling. By comparison, that same figure averaged 4.7 from 1947 until the beginning of the financial crisis, so we're talking about a 31.9% decrease.
Individual company data is even more graphic - pun absolutely intended.
Disney boosted operating margins from 13% in 2005 to 21% while terminating loads of workers and closing offices. Defense contractor Northrop Grumman has bluntly raised expectations by cutting jobs to boost net income. Its profit margin rose 56%, from 5% in 2009 to 7.8% in 2012, as noted by Bloomberg.
This isn't just a U.S. problem.
In Japan, for example, Toyota, Mazda, and Panasonic have all cut tens of thousands of jobs and closed once thriving production lines while offshoring remaining production.
Even Europe, with its comparatively inflexible labor laws, is feeling the bite despite being the slowest to cut labor and, as a result, boost profits. Italian labor unions, for instance, are trying desperately to hold on to nearly 200,000 jobs split amongst 150 companies looking to cut them. France, Germany, Spain, and England are in the same boat, with companies struggling to make a go of it.
Unfortunately, the issue may be moot.
Big American companies like Ford, Whirlpool, and GE are simply selling off European operations - or closing them entirely - to save their bottom lines from the hassle, not to mention the earnings impact. Asian firms like Sony and Fujitsu are rumored to be interested in dumping European facilities, too, and for the same reasons.
I believe incoming Fed Chair Janet Yellen is keenly aware of the international implications of cheap capital and expanding margins. So she'll do everything she can to boost both, knowing that an estimated 40% to 60% of S&P 500 revenues come from overseas operations.
Charted Truth No. 3
Earnings have doubled since October 2009, while sales growth is slowing.
Source: FactSet Earnings Insight, Standard & Poor's Corporation, via Yardini.com
Under normal market conditions, slowing revenue growth and record-high profit margins are not a recipe for continued growth unless earnings can support the equation.
This time around, they are.
That's because companies are willing to invest in potential productivity growth as long as the Fed provides the cheap capital needed to fuel it. By the way, this is what people mean when they talk about what was the "Greenspan put," which became the "Bernanke put," which is now set to become the "Yellen put."
Normally, companies would be bracing for slowing activity. But this time around, they're looking for additional earnings expansion using a trifecta of exceptionally low wage rate pressure, historically low debt service costs, and share buybacks that could boost year-over-year EPS growth by upwards of 1.5% to as much as 2%.
Yellen won't risk upsetting this delicate balance if for no other reason than to serve Washington's interests. I can't imagine the pressure she's under.
You Can Take Advantage of This Situation
The $14 trillion we've seen created out of thin air via a five-year rally that began 165.35% ago in March 2009 is just getting warmed up.
As long as money remains cheap and companies can cut costs further while also overtly resisting new full-time hiring, profit margins will continue to increase.
Bloomberg and S&P data pin bottom-line growth next year at approximately 10%. My own expectations are a little more aggressive.
I believe 11%-12% bottom line growth is more likely, as long as Yellen keeps her foot on the gas. I say that if for no other reason than the markets have perpetually underestimated how adept corporate America is when it comes to squeezing profits out of thin air. So rising equity prices are a means of catching up.
And the key to capturing that?
With very few exceptions, I think that "glocals" are the place to be for the next 12 months. That's what I call companies like ABB, Raytheon, and AFLAC - firms with globally recognized brands, internationally diversified sales, strong balance sheets, and disciplined management. I'm game for small caps, too, but more as "spice" than "sauce," so to speak. (If you follow Sid's Small Cap Rocket Alert recommendations, you know a dash of the right "spice" can go a long, long way.)
Dividends are exceptionally important right now and should be a source of renewed emphasis for every investor, because they offer cold hard cash as compensation for the ownership risk you take when you buy them.
I'm also increasingly a fan of bottom fishing into 2014, because I think very aggressive tax harvesting will put the best companies in several key sectors on sale. If you're not familiar with the term, that's what people call selling big winners to harvest losses that offset the capital gains normally incurred with big winners.
My favorites at the moment include Chinese industrial fabricators, resource plays, and even REITS that have been trashed to the tune of 40%, 50%, or even more.
But act quickly - tax-loss sales have historically peaked in mid-December, which sets up a "recovery rally" of sorts into 2014.
And you just know the White House would love to tout that "it" made that happen come mid-term elections.
http://moneymorning.com/2013/12/05/three-charts-obama-hopes-youll-never-see/
The Rare Holiday Discount Sale Is In The Precious Metals And Junior Miners
Dec 6, 2013
Jeb Handwerger
SeekingAlpha
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Its truly a rare bargain deal for precious metals this holiday season. While the masses chase the Black Friday and Cyber Monday deals the smart investor is buying gold, silver and the junior miners on a rare, possibly historic bargain sale. Many of the experienced precious metal investors and fund managers have never seen such a bargain situation in the junior miners. It is truly a rare discount in the precious metals complex which has had 12 straight years of back to back gains. The sector is entitled to take a breather and smart investors should use this time as a buying opportunity.
This comes at a time when quantitative easing is causing one of the great equity rallies in history despite the rising risk of a credit downgrade on U.S. sovereign debt. What we witnessed in 2011 when gold (GLD) ran to $1900 and silver (SLV) went to $50 may be just the beginning.
Investors are chasing the latest fads in bitcoins, social media and banks ignoring the great financial risks present from massive debts and entitlements. QE may be causing a rally in equities, yet the real economy such as employment is seeing no major benefit.
Don't get caught up with the bitcoin bubble which is a modern day tulip mania. Gold and silver may be on the verge of a major bullish reversal at $1200, possibly forming a double bottom. Gold and silver appear to be testing summer lows at $1200 where I expect many of the shorts will start covering and new buying should begin.
Most investors are caught up with what The Fed will do with taper and forget what The Fed has done with QE that may send precious metals soaring over the long term. Gold, Silver and the miners (GDX) especially the silver (SIL) and junior miners (GDXJ) may begin to outperform.
Conditions in the precious metals complex are very oversold and the large short position is bullish for a rally in the short term. Everyone may have already sold anticipating tax loss selling which has been predicted by many pundits.
I expect to see accumulation to reenter the market similar to the this past summer when gold went from $1200 to over $1400. This does not mean that we may see some more testing of the $1200 with a possible shakeout below.
Now some big banks are advising clients to go short gold and the miners. This may be one of the most dangerous and risky moves as there are many catalysts that could cause a spike higher rather than lower. Due to the banks shorting precious metals, gold is hitting prices way below the average cost of production forcing the big and junior miners to mothball projects. These cutbacks plant the seeds for the next major rally as supply is decreasing rapidly.
Already new discoveries were at an all time low, good mines have been taken over by corrupt governments all over the world with the rise of resource nationalism and now the financing market prevents new exploration.
This could lead us to a major supply shortfall in gold and silver over the next few years. The aggressive shorting could be setting the stage for a major snapback rally that could move violently to the upside.
Be prepared for a "W" shape reversal in gold, silver and the junior miners which have been basing for close to three years and are very oversold. Savvy investors may be a little early in claiming good times are here again. Better to be early then late.
The global economy and debt situation remains challenging and a major fiscal event could happen in the near term. Those coming late will have to chase powerful rallies. We have been seeing an outflow from the gold and silver ETF's as investors have been chasing equities higher. This may change soon as investors become more aware of the systemic risks.
For many months, we have heard that the Fed may taper quantitative easing through many mainstream media outlets. Now the time has come when the masses may have already priced in a reduction of quantitative easing, not realizing that quantitative easing may actually increase and may be ongoing to pay down soaring debts.
The Fed may have used the taper terminology in the press and the banks short the metals sector as a diversionary tactic to make an illusion that inflation is subdued. The equity markets are in a bubble and have moved way ahead of the economy where we see a record numbers of Americans who are exiting the labor force and are becoming unfunded liabilities. The U.S. debt crisis is far from over.
Look at Detroit and many other cities in bankruptcies due to unfunded liabilities. All across the U.S. deficits are rampant. Debts are strangling cities and municipalities. How soon investors forget that only a few months ago Detroit, the industrial and auto manufacturing center of the U.S., became the largest municipality in U.S. history to file for bankruptcy with unpaid debts of over $18 billion.
The Fed needs to protect these cities on the verge of bankruptcy by manipulating interest rates lower. This is done through quantitative easing. Talks of taper over the past few months have crushed U.S. bonds with yields doubling over the past year.
Over the past fifty years the U.S. has sent its industries offshore resulting in a massive transfer of workers from manufacturing into government. This needs to be changed. The job numbers continue to be awful with the unemployment rate going down for the wrong reason. More U.S. employees are leaving the work force.
Rising interest (TLT) rates could initiate the next decline in housing (XHB). The Fed must be very careful as they fear rising rates could spark more bankruptcies, higher unemployment and pop the reinflated housing bubble.
Look for gold and silver to bounce higher, which have been correcting since the July-August rally due to fears of tapering. I expect a bounce to occur after tax loss selling subsides.
There are just too many black swans, the Middle East crisis with Syria and Iran and the risk of rising inflation and debt debacle is great. Look for a rally in high quality junior miners advancing top notch gold and silver assets in friendly mining jurisdictions especially Nevada, Alaska, Ontario, Wyoming and Saskatchewan.
Gold and silver has proven itself throughout the history of mankind to be one of the only assets that is stable in a shaky world...not bitcoins. Look for continued weak employment data combined with debt woes that should support an accommodative Fed.
Gold and silver have been manipulated and shorted lower by fear-mongers who claims that the gold bubble has burst and that the Fed will tighten. I continue to disagree with this view.
The long term trend in precious metals remains higher and tapering should not occur as the U.S. deals the need to pay off soaring debts and the rising costs of Obamacare with cheap dollars. Gold and silver is entitled to a year off. Investors should in no way see this as an end to the rally but just a breather providing a secondary buying opportunity.
In conclusion, it may be time to continue buying gold, silver and the highest quality junior miners on sale trading at historical lows as tax loss selling season may provide exceptional deals at multi year lows. Only the best mining stocks with good management, properties, finances and who are active in stable jurisdictions will survive as this has been the worst decline in mining equity history.
http://seekingalpha.com/article/1881621-the-rare-holiday-discount-sale-is-in-the-precious-metals-and-junior-miners
The Rare Holiday Discount Sale Is In The Precious Metals And Junior Miners
Dec 6, 2013
Jeb Handwerger
SeekingAlpha
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Its truly a rare bargain deal for precious metals this holiday season. While the masses chase the Black Friday and Cyber Monday deals the smart investor is buying gold, silver and the junior miners on a rare, possibly historic bargain sale. Many of the experienced precious metal investors and fund managers have never seen such a bargain situation in the junior miners. It is truly a rare discount in the precious metals complex which has had 12 straight years of back to back gains. The sector is entitled to take a breather and smart investors should use this time as a buying opportunity.
This comes at a time when quantitative easing is causing one of the great equity rallies in history despite the rising risk of a credit downgrade on U.S. sovereign debt. What we witnessed in 2011 when gold (GLD) ran to $1900 and silver (SLV) went to $50 may be just the beginning.
Investors are chasing the latest fads in bitcoins, social media and banks ignoring the great financial risks present from massive debts and entitlements. QE may be causing a rally in equities, yet the real economy such as employment is seeing no major benefit.
Don't get caught up with the bitcoin bubble which is a modern day tulip mania. Gold and silver may be on the verge of a major bullish reversal at $1200, possibly forming a double bottom. Gold and silver appear to be testing summer lows at $1200 where I expect many of the shorts will start covering and new buying should begin.
Most investors are caught up with what The Fed will do with taper and forget what The Fed has done with QE that may send precious metals soaring over the long term. Gold, Silver and the miners (GDX) especially the silver (SIL) and junior miners (GDXJ) may begin to outperform.
Conditions in the precious metals complex are very oversold and the large short position is bullish for a rally in the short term. Everyone may have already sold anticipating tax loss selling which has been predicted by many pundits.
I expect to see accumulation to reenter the market similar to the this past summer when gold went from $1200 to over $1400. This does not mean that we may see some more testing of the $1200 with a possible shakeout below.
Now some big banks are advising clients to go short gold and the miners. This may be one of the most dangerous and risky moves as there are many catalysts that could cause a spike higher rather than lower. Due to the banks shorting precious metals, gold is hitting prices way below the average cost of production forcing the big and junior miners to mothball projects. These cutbacks plant the seeds for the next major rally as supply is decreasing rapidly.
Already new discoveries were at an all time low, good mines have been taken over by corrupt governments all over the world with the rise of resource nationalism and now the financing market prevents new exploration.
This could lead us to a major supply shortfall in gold and silver over the next few years. The aggressive shorting could be setting the stage for a major snapback rally that could move violently to the upside.
Be prepared for a "W" shape reversal in gold, silver and the junior miners which have been basing for close to three years and are very oversold. Savvy investors may be a little early in claiming good times are here again. Better to be early then late.
The global economy and debt situation remains challenging and a major fiscal event could happen in the near term. Those coming late will have to chase powerful rallies. We have been seeing an outflow from the gold and silver ETF's as investors have been chasing equities higher. This may change soon as investors become more aware of the systemic risks.
For many months, we have heard that the Fed may taper quantitative easing through many mainstream media outlets. Now the time has come when the masses may have already priced in a reduction of quantitative easing, not realizing that quantitative easing may actually increase and may be ongoing to pay down soaring debts.
The Fed may have used the taper terminology in the press and the banks short the metals sector as a diversionary tactic to make an illusion that inflation is subdued. The equity markets are in a bubble and have moved way ahead of the economy where we see a record numbers of Americans who are exiting the labor force and are becoming unfunded liabilities. The U.S. debt crisis is far from over.
Look at Detroit and many other cities in bankruptcies due to unfunded liabilities. All across the U.S. deficits are rampant. Debts are strangling cities and municipalities. How soon investors forget that only a few months ago Detroit, the industrial and auto manufacturing center of the U.S., became the largest municipality in U.S. history to file for bankruptcy with unpaid debts of over $18 billion.
The Fed needs to protect these cities on the verge of bankruptcy by manipulating interest rates lower. This is done through quantitative easing. Talks of taper over the past few months have crushed U.S. bonds with yields doubling over the past year.
Over the past fifty years the U.S. has sent its industries offshore resulting in a massive transfer of workers from manufacturing into government. This needs to be changed. The job numbers continue to be awful with the unemployment rate going down for the wrong reason. More U.S. employees are leaving the work force.
Rising interest (TLT) rates could initiate the next decline in housing (XHB). The Fed must be very careful as they fear rising rates could spark more bankruptcies, higher unemployment and pop the reinflated housing bubble.
Look for gold and silver to bounce higher, which have been correcting since the July-August rally due to fears of tapering. I expect a bounce to occur after tax loss selling subsides.
There are just too many black swans, the Middle East crisis with Syria and Iran and the risk of rising inflation and debt debacle is great. Look for a rally in high quality junior miners advancing top notch gold and silver assets in friendly mining jurisdictions especially Nevada, Alaska, Ontario, Wyoming and Saskatchewan.
Gold and silver has proven itself throughout the history of mankind to be one of the only assets that is stable in a shaky world...not bitcoins. Look for continued weak employment data combined with debt woes that should support an accommodative Fed.
Gold and silver have been manipulated and shorted lower by fear-mongers who claims that the gold bubble has burst and that the Fed will tighten. I continue to disagree with this view.
The long term trend in precious metals remains higher and tapering should not occur as the U.S. deals the need to pay off soaring debts and the rising costs of Obamacare with cheap dollars. Gold and silver is entitled to a year off. Investors should in no way see this as an end to the rally but just a breather providing a secondary buying opportunity.
In conclusion, it may be time to continue buying gold, silver and the highest quality junior miners on sale trading at historical lows as tax loss selling season may provide exceptional deals at multi year lows. Only the best mining stocks with good management, properties, finances and who are active in stable jurisdictions will survive as this has been the worst decline in mining equity history.
http://seekingalpha.com/article/1881621-the-rare-holiday-discount-sale-is-in-the-precious-metals-and-junior-miners
Comex Deliverable Gold Still Out On the Tails of Leverage at 57 to 1
Posted by Jesse
at 12:48 PM 05 December 2013
(special thanks to basserdan)
"Jim, lad, there be consequences an' then there be consequences. Devil take 'em all, says I, and pass aft the rum."
-Robert Louis Stevenson, Treasure Island
The ratio of potential claims to deliverable gold remains at an extreme of 57 to 1, despite the pricing antics designed to shake off the standing longs, and to scrape out physical supply from wherever it can be had.
But the leverage remains quite high in what is normally a big delivery month of December. That so few longs have yet to be filled with physical bullion is interesting.
January is a non-active month.
So we will probably see continued volatility, more price bluffing maneuvers, and more disinformation from hangers-on, hired help, and useful idiots.
The shorts are trapped, and it is just a matter of time until they have to let go and allow the price to rise. And the odd thing is that the producer/merchants have already read this and have shifted their shorts to the 'smart money.'
I think for now the gold bears' goal is for the bullion banks and hedge funds to get through the big December delivery month without breaking anything or losing control of price, even if they have to allow it to rise towards the end of year to permit more gold to come to delivery.
And the Banks keep encouraging the funds to take those shorts on to the limit. Hoo hah.
What is lacking is a major player who is willing to call them out. So far the game is 'working' for everyone on the short term. Those who want it are getting bullion on the cheap, and those who want to take their short term money are getting paid.
It will be an interesting month. I will be surprised if there is a resolution, and as you know I do not expect a Comex default, although a technical de facto default is always a possibility, as a fail to deliver and a force majeure.
More likely the jokers will continue to try and bluff through year end and close their books, and regroup in January if they can make it without allowing the price to rise too far. They may keep doubling down and increasing their leverage. What could go wrong? This is how an LTCM and MF Global happens. They are a bit hard to predict because of the obvious opacity, but also because it takes some player or some incident to send them tipping over.
But it does seem to be in a spiral now as the physical offtake to Asia and strong hands continues. Most of the world sees the gold leasing scheme for what it is, even if those in the fog of the Anglo-American banking cartel do not. There the status quo maintains its studied silence, while the flacks continue to put up their smokescreens for their cronies and patrons. And it is hard to believe that there are those in official positions who are not aware, and providing support for this both directly and indirectly.
What a funny system of price discovery this is. With a few minor variations, the ending seems almost inevitable.
And yet we keep coming back to this place, again and again. Wickedness is resilient, persistence, but the virtue and vigilant righteousness of the people seems to ebb and flow.
"Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.
When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin!
Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out."
From the original minutes of the Philadelphia bankers sent to meet with President Jackson February 1834, from Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels
http://jessescrossroadscafe.blogspot.com/2013/12/comex-deliverable-gold-still-out-on.html
Bankers Balking at Bitcoin in U.S. as Real-World Obstacles Mount
By Carter Dougherty
Dec 5, 2013 5:05 PM ET
Bloomberg
Bitcoin, the digital money created as an alternative to currencies controlled by nations and banks, is finding that its wider adoption depends on both as governments in China and the U.S. demand enthusiasts play by existing rules.
Bitcoin exchanges, payment processors and other startups say they need banks to connect them to the existing payments system and provide basic services like checking accounts. To do that, the fledgling companies must convince the regulators who police the banks that Bitcoins aren’t being used to conceal illicit activity.
“Banks are scared to deal with Bitcoin companies, even if they really want to,” said Stephen Pair, co-founder and chief technical officer of BitPay Inc., an Atlanta-based company that processes payments for merchants in Bitcoin. Pair said BitPay has relationships with banks in the U.S., Canada and Europe; he declined to name them at the banks’ request.
Regulators show little sign of losing interest in tracking financial flows, be they in dollars, renminbi or Bitcoin. China’s central bank yesterday barred financial institutions from buying and selling the virtual currency and from pricing products in Bitcoin, sending prices tumbling more than 10 percent, according to the CoinDesk Bitcoin Price Index, which synthesizes prices across major global exchanges where Bitcoins can be traded for traditional currency. Its value stood at $1,052.25 at 5 p.m. New York time.
Photographer: George Frey/Bloomberg
A pile of Bitcoins.
Prices jumped last month when a Department of Justice official described the currency as “a legal means of exchange.” Still, another regulator at the same event warned that Bitcoin-related businesses would need to meet current money-laundering standards before banks would agree to work with them. Central banks in the Netherlands and France have also warned that the currency has no government guarantees.
Accounts Shuttered
Regulators have pressured banks to close some Bitcoin-related accounts. Tradehill Inc., a San Francisco-based exchange, shut down in August after its bank, Internet Archive Federal Credit Union, dumped Bitcoin-related clients for what it called “regulatory issues.” U.S. officials also shut down an account at Wells Fargo & Co. used by Mt. Gox, a Japan-based exchange, to service U.S. customers.
Introduced in 2008 by a programmer or group of programmers under the name Satoshi Nakamoto, Bitcoin is the most prominent of a group of virtual currencies -- money that exists mainly as a string of code -- that have no central issuing authority. Today, despite its unclear status, Bitcoin can be used to pay for t-shirts, food or an appointment with a Manhattan psychiatrist.
Photographer: Tomohiro Ohsumi/Bloomberg
Regulators have pressured banks to close some Bitcoin-related accounts.
Niche Market
Bank reluctance to host accounts for Bitcoin-related transactions is an obstacle for businesses seeking to expand its use. Without access to traditional banks and the ability to freely exchange Bitcoin for other currencies, the virtual currency risks remaining a novelty for niche users. The issue is expected to be a prime topic of discussion at a conference for Bitcoin enthusiasts next week in Las Vegas.
Richard Riese, senior vice president of the American Bankers Association, said the ability to bank Bitcoin transactions “is not high on our members’ list” of priorities. By contrast, at a recent ABA conference, bankers were less concerned about providing bank accounts for marijuana sellers in the states of Colorado and Washington, which have legalized recreational use while it remains a federal crime.
Because of regulatory pressure in the U.S., much of the exchange business has moved to Britain, Japan and China, Jered Kenna, founder of Tradehill, the Bitcoin exchange that lost its bank, said in an interview. LightSpeed Venture Partners, based in Menlo Park, California, announced on Nov. 18 that it would invest $5 million in BTC China, now the world’s largest Bitcoin exchange by volume.
Chinese Hosts
“The biggest indicator that the U.S. is losing this battle is that the first major VC to make an investment was in China,” Kenna said.
Bitcoin-related businesses say that when they do find banks willing to work with them, they often require them to keep the banking relationship quiet. Fred Ehrsam, co-founder of Coinbase, a San Francisco company that facilitates transactions for Bitcoin users by hosting digital wallets to store the currency, said the banks his firm uses don’t want to be inundated with requests.
“Our bank has asked us not to tell -- not because they’re ashamed but because so many Bitcoin businesses are looking for bank accounts,” Ehrsam said.
Mary Dent, a former bank general counsel in Silicon Valley, said bankers are reacting to Bitcoin the way most people do to any new payment form.
‘Crazy’ Currency
“If you heard about somebody getting mugged for the first time, you’d think cash is crazy,” said Dent, founder of Palo Alto, California-based consultancy dcIQ. “If you heard about credit card fraud for the first time, you’d think cards are crazy. Bitcoin is suffering from that.”
Richele Messick, a spokeswoman for Wells Fargo, declined to comment, as did Tyler Daluz of Citigroup Inc.
This idea -- that Bitcoin is more of a threat than an opportunity -- has dominated bank thinking about Bitcoin for most of its existence, Dent said. The federal bust of the Silk Road Hidden Website, an online drug and weapon marketplace where users paid in Bitcoin, highlighted the potential for illicit business, while thieves have also purloined Bitcoins online.
Benjamin Lawsky, the superintendent of New York’s Department of Financial Services subpoenaed 22 Bitcoin-related companies this year. In an Oct. 1 interview, he said the “major advantage” Bitcoin provides is anonymity, a cloak for illegality.
Money Laundering
Marco Santori, a lawyer with Nesenoff & Miltenberg LLP in New York, said the bank position is reasonable since U.S. law has “deputized” them to scrutinize every transaction for possible money laundering.
“Banks will want to provide services to administrators or exchanges that show not only great innovation, but also great integrity and transparency,” said Jennifer Shasky Calvery, director of the Treasury Department’s Financial Crimes Enforcement Network.
As a result, Bitcoin companies have ramped up their Washington lobbying, hiring lawyers and former regulators to make their case to government agencies and demonstrate to potential banking partners that they take regulators seriously.
Ehrsam, a former Goldman Sachs Group Inc trader, hired a chief compliance officer, Martine Niejadlik, who previously worked at EBay Inc and Amazon.com Inc. “She’s seen this movie before,” Ehrsam said.
Hiring Experts
Circle Internet Financial Inc. won the biggest venture capital investment yet, $9 million, for a Bitcoin startup, from Accel Partners and General Catalyst Partners. One of its first moves was to hire John Beccia, former chief regulatory counsel for the Financial Services Roundtable, a lobbying group that represents major financial institutions including JPMorgan Chase & Co. and Bank of America Corp. and the dominant payment networks, Visa Inc. and MasterCard International Inc.
Circle also put Raj Date, former deputy director of the Consumer Financial Protection Bureau and a veteran of Capital One Financial Corp., on its board.
All the same, the established financial services industry expresses skepticism of prospects for business ventures with Bitcoin entrepreneurs.
“For now I would opine that we are not yet there with digital currencies,” Paul Smocer, who oversees technology policy for the Washington-based Roundtable, said at a Nov. 19 congressional hearing. “They do provide opportunities -- more accurately, perhaps, suggest areas of opportunity -- but we will need to address the threats to consumers and society.”
Kenna, the head of Bitcoin exchange Tradehill, emphasized that “for the foreseeable future” the industry would need banks and need to respond to their concerns. “And the foreseeable future could be 50 years.”
To contact the reporter on this story: Carter Dougherty in Washington at cdougherty6@bloomberg.net
To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net
http://www.bloomberg.com/news/2013-12-05/bitcoin-skepticism-by-bankers-from-china-to-u-s-hinders-growth.html
People Are Buying A Lot Of Silver And Gold With Their Bitcoins
ROB WILE
DEC. 4, 2013, 12:51 PM
BusinessInsider
Gold and silver bullion was apparently among the biggest selling items on Bitcoin Black Friday.
According to Bitpay, one of the largest Bitcoin payment processors, the top-three online retailers on November 29 were KnCMiner (whose gonzo order volume for its latest mining device we told you about yesterday), Gyft, and Amagi Metals.
Amagi Metals chief Stephen McAskill told BI in a separate interview that his site processed $900,000 worth of bitcoin between Thanksgiving and Sunday. The biggest selling items were silver and gold coins and bars, he said.
"To me it makes sense," he said. "A lot of bitcoin enthusiasts are interested in sound money, money that doesn't lose value."
But there are still enough users who think bitcoin will someday retain the value of gold, he said.
We asked Gyft, a gift card site, for any more data about what people bought with Bitcoin, and spokesman Ian Chaffee could only say electronics and food.
For the month of November, Bitpay processed 55,288 bitcoin transactions. They did not provide us with a total dollar figure for the month. Here's a chart:
Bitpay
The price of bitcoin as of Wednesday afternoon was $1,1184. The price of an ounce of gold was $1,228.
Read more: http://www.businessinsider.com/bitcoin-black-friday-results-2013-12#ixzz2mhWpKjw5
Blackstone Made Money on Credit-Default Swaps With This One Weird Trick
By Matt Levine
Bloomberg
Dec 5, 2013 5:47 PM ET
The Blackstone Codere trade -- in which Blackstone Group LP bought credit-default swaps on troubled Spanish gaming company Codere SA, then agreed to roll a $100 million revolver for Codere on favorable terms in exchange for Codere agreeing to make an interest payment on some bonds two days late, thus creating a technical default and triggering the CDS, pocketing some gains for Blackstone at the expense of the CDS writers, without costing Codere anything -- is such a glorious pinnacle of financial achievement that of course someone had to make a television show about it. I would have preferred a prime-time miniseries, but what we got is a "Daily Show" segment, and that will have to do. Here it is.
The segment consists mostly of Samantha Bee going around to TV networks, newspapers and BuzzFeed and asking if they'd covered the Codere story and getting some variation on "no" for an answer. Except Bloomberg! Bloomberg News broke the story! No thanks to me of course,1 but I will nonetheless choose to be filled with pride because I work at a financial media organization that covered a European credit derivatives trade that even BuzzFeed missed.
That said, "The Daily Show" is perhaps a bit harsh. Codere is a small company in a faraway land. This trade, while lovely, was smallish; Blackstone made something like 11 million to 14 million euros on its CDS payout. No widows or orphans were harmed: The only losers here were the people who wrote CDS to Blackstone. Those people were presumably sophisticated, well-informed traders at big banks, and if they are honest with themselves, their reaction to losing on this trade is envy and admiration and possibly tweaking future CDS documentation.2
Really, the only reason to cover this story is its majestic beauty. Which is a great reason to cover it, don't get me wrong; it's just that aesthetic appreciation of clever derivatives trades is sort of a specialized niche. Certainly "The Daily Show" didn't muster much admiration and instead spent seven minutes criticizing everyone else for not covering the story. This is wrong. This trade is so lovely that the proper reaction is to love it and cherish it and hold it close to your heart, not to complain that nobody else does.
There's one other reason not to worry unduly about this trade, and I hesitate to bring it up, but: It's not really as bad as it looks. I mean, yes, it is very, very clever. It achieves the second-highest goal of any financial engineering, which is to create genuine value for both parties to a transaction (here, Blackstone and Codere) by taking that value from some third party who's not in the room.3 So that is great. As Blackstone spins it:
We love Jon Stewart and he continues to be one of the funniest people on TV. But the somewhat boring truth is that we cooperated with Codere and its advisors to save it from bankruptcy or liquidation. We provided capital when no one else would, which allowed the Company to live and fight another day.
And they could provide that capital efficiently because they took some value from their CDS writers.
But you shouldn't overstate that value. The reason that Blackstone made money on its credit-default swaps is not just that they were triggered by this clever maneuver. Just triggering CDS is not a big deal, because CDS pay out based on the difference between the face value of a bond and its post-default trading value. If Berkshire Hathaway Inc. forgot to make a bond payment and remembered two days later, Berkshire CDS would trigger and there'd be an auction and people who own CDS would get paid. But they'd get paid, in round numbers, nothing: Berkshire Hathaway bonds would still be worth pretty much par, and so the CDS payment would be low.4
Instead, Codere's bonds were worth 54.5 cents on the dollar in the CDS auction, so Blackstone got paid 45.5 points on its CDS, which is a lot. (Sometimes people use a stylized model that assumes 40 percent recovery on default, meaning that the 54.5 percent recovery here is much closer to a real, bankruptcy-esque default than it is to a technical, you-still-get-par default.) It got that money not just because of the missed interest payment, but also because Codere credit, after the technical default and Blackstone's loan extension to Codere, remained really risky. Codere's other bonds still trade in the mid- to high 50s.
And Blackstone is still a lender to Codere, taking that risk.5
The credit-default swaps market is a way to express in terms of money the market's estimate of a company's chance of default -- real default, not missing a payment by two days -- in the future. Blackstone found a way to turn that expression in terms of money into money. One day it had a CDS contract with a mark-to-market value of 11 million euros or whatever; the next day it had 11 million euros.6 One day the banks were taking risk on Codere's credit that had gone against them to the tune of 11 million euros; the next day they had no risk and 11 million fewer euros. The risk that they got rid of was still worth about 11 million euros. (It still is now, too.7)
There's some friction here -- with cheapest-to-deliver options, with different notional sizes, etc. -- but basically what Blackstone did was take some money from people who were betting on Codere credit without financing Codere, and give it to -- I almost said Codere, but no, ha ha, mostly Blackstone gave the money to Blackstone. But at least Blackstone is financing Codere. It took money from an abstract zero-sum derivatives bet and turned it into an actual loan to an actual company that actually needed the money. To run casinos and racetracks, but still. That seems like the sort of trade "The Daily Show" should be willing to get behind.
1 I mentioned it in a linkwrap a week later, so my conscience is clear. Also, though: Go read it if you haven't! It is amazing!
2 None of the losers seem to be quoted in that Bloomberg News article; I suppose that, in addition to envy and admiration, embarrassment would be an appropriate emotion for them to feel. Some earnest bond-investor types are quoted as saying things like "This is totally irrational from the perspective of an investor who loans money to a company, buys the bonds or loans, and expects to get paid back," but all that means is that they need to change their perspective, man.
3 The highest goal would be to create value for both sides without taking it from anyone else. That probably happens, sure.
4 Ooh, that sentence is an exaggeration. I mean, it's a stylized fact, but it is not a true fact. Interest-rate moves mean that the cheapest-to-deliver Berkshire bond would be below par. Actually, I see a 4.3 of 2043 trading at around 90. So you could make 10 points on a technical default. Consider also CDS on the United States. These moves are due to rates, not credit, so it feels a bit like cheating, but there it is.
5 And now without CDS! I guess. I mean, I guess they could have plowed their profits into buying more CDS, but then there'd be no profits. Negative profits -- per that Bloomberg News story, Blackstone had 25 million to 30 million euros of CDS notional, while it and Canyon Partners are the lenders on a 100 million euro loan.
6 Really, the CDS was wider before the default than after. Here's the one-year:
Source: Bloomberg (CMAQ data)
7 This, too, is an exaggeration; Blackstone's swaps seem to have been quite short-dated for maximum leverage, so you could imagine a Codere CDS with just a month to go looking less risky now. But you have to imagine the counterfactual: If Blackstone hadn't done this trade and rolled Codere's credit facility, the chances of an actual default by now presumably would have been higher.
http://www.bloomberg.com/news/2013-12-05/blackstone-made-money-on-credit-default-swaps-with-this-one-weird-trick.html
No Evidence for Gold and Silver Price Manipulation Commodities / Gold and Silver 2013
Dec 04, 2013 - 05:29 PM GMT
By: John_Mauldin
Grant Williams
This is an early warning. I'm going to be talking about gold (again) this week, so those amongst you who just kinda wish I wouldn't do that may be excused.
There. Now it's just us.
On November 1, 1961, an agreement was reached between the United States and seven European countries to cooperate in achieving a shared, and very clearly, stated aim.
Actually, let me adjust that last paragraph ever so slightly in the interests of accuracy:
On November 1st, 1961, an agreement was reached between the central banks of the United States and seven European countries to cooperate in achieving a shared, and very clearly stated, aim.
Did you see what I did there? A small amendment, I'll concede, but an important one — particularly as, 52 years later, we witness the incredible power now wielded by those august institutions.
But back to November 1961 and those eight central banks.
The signatories to this particular agreement were, in alphabetical order, the central banks of Belgium, France, Germany, Italy, the Netherlands, Switzerland, the United Kingdom, and the United States; but unlike other agreements of the time — such as that signed at Bretton Woods in 1944 — this one had no catchy title and was agreed upon with no fanfare and no publicity. In fact, this particular agreement was, if not exactly secret, then secretive by design.
It was put into place after a sudden spike in the gold price from its "official" level of $35.20 to over $40 on concerns in late 1960 that whoever won the impending US election might devalue the dollar in order to address the country's balance of payments problem.
The agreement became known as the London Gold Pool, and it had a very explicit purpose: to keep the price of gold suppressed "under control" and pegged regulated at $35/oz. through interventions in the London gold market whenever the price got to be a little ... frisky.
The construct was a simple one.
The eight central banks would all chip in an amount of gold to the initial "kitty." Then they would sell enough of the pooled gold to cap any price rises and then replace that which they had been forced to sell on any subsequent weakness.
The United States — which at that stage owned roughly 47% of the world's monetary gold (excluding that owned by the Soviet bloc) — promised to match every other bank's contribution, ounce for ounce. The value of the US gold hoard was very easy to calculate, thanks to the fixed price of gold at the time ($35):
$17,767,000,000.
Or, put another way, roughly 6 days' worth of QE.
However, somewhat remarkably, only seven years prior, the United States' gold hoard constituted 72% of the world's gold (ex-those pesky Soviets) and was worth an additional $7,000,000,000. More than $5,000,000,000 had been sold between 1958 and 1960.
The other tiny problem, what with the dollar's being convertible into gold and all, was that official institutions, banks, and private holders abroad had roughly $19,000,000,000 of short-term and liquid dollar claims.
So... the US Federal Reserve offered to match the contributions of Happy, Bashful, Grumpy, Sleepy, Dopey, Greedy, and Doc the other seven central banks, which meant that, at its inception, the London Gold Pool looked like this:
We interrupt this letter to bring you an important message from the Commodities Futures Trading Commission:
There is no evidence of manipulation in precious metals markets.*
*Statement is subject to standard terms and conditions and is not necessarily reflective of any evidence. Government entities are excluded from inclusion based on the fact that we can't really do anything about them; and, anyway, they could put us out of business, and it would make things really, really bad for them. Also, bullion banks are not covered under this statement because we were told they shouldn't be, but individual investors are, and we can categorically confirm that, to the best of our knowledge, no individuals are manipulating the precious metals markets (at this time).
We now return to our regularly scheduled programming.
Initially, everything ran smoothly, and the satisfied grins at those eight central banks must have been borderline sickening to behold.
To continue reading this article from Things That Make You Go Hmmm… – a free weekly newsletter by Grant Williams, a highly respected financial expert and current portfolio and strategy advisor at Vulpes Investment Management in Singapore – please click here.
Continued at link below;
http://www.mauldineconomics.com/ttmygh/twisted-by-the-pool
http://www.marketoracle.co.uk/Article43412.html
China Reduces its US Dollar Holdings. The Geopolitics of “Forex Reserves Diversification”
By Global Research News
Global Research, December 04, 2013
Route Magazine
by Route Magazine
China and Russia are quitting US dollar or at least significantly cutting the dollar share in their forex reserves. Politically correct American analysts call this process “rapid forex reserves diversification”. In fact, some economists see this trend as a threshold in the unfolding world crisis because the whole pyramid of global finance is based on one simple fact – financial regulators around the world buy the US debt (dollar & treasuries) no matter what.
“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting.
Neither Yi nor Zhou gave a timeframe for any changes. It is well-known that Chinese authorities as a rule tend to avoid sharp changes in political economy. Such policies are implemented in such a discreet manner that people do not even realise the ongoing transformation. What’s interesting, the Central Banks do not announce such things so loudly. For example, over the period from the end of January 2013 to the end of July, the Bank of Russia reduced its stockpile of US Treasury securities from USD 164.4 billion to USD 131.6 billion, which means that over the course of six months, it reduced its portfolio of US Treasury obligations by USD 32.8 billion, or by 20 percent. Closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.
1. “In recent years, China has been incrementally moving away from US financial hegemony. This hegemony is predicated on the US dollar being the world reserve currency and, by convention, the standard means of payment for international trade and in particular trade in oil. That arrangement is obsolete given the bankrupt state of the US economy. But it allows the US to continue bingeing on credit. China – the second biggest economy in the world and a top importer of oil – has or is seeking oil trading arrangements with its major suppliers, including Russia, Saudi Arabia, Iran and Venezuela, which will involve the exchange of national currencies.
Image Source - The Wall Street Journal
That development presents a grave threat to the petrodollar and its global reserve status. The latest move by Beijing on November 20 giving notice that it intends to shift its risky foreign exchange holdings of US Treasury notes for a mixture of other currencies is a harbinger that the American economy’s days are numbered, as Paul Craig Roberts noted.”
2. Beijing’s slow strategy of quitting the dollar harmonizes perfectly with Russia’s strategy of balancing its forex reserves, writes Valentin Katasonov of the Strategic Culture Foundation. He notes that Chinese decision is a cautious attempt to challenge US financial hegemony. Beijing’s idea is to stop the creation of an artificially inflated demand for US currency.
six steps of the Chinese are as follows:
* The decision taken by the People’s Bank of China in the summer of 2010 to reinstate a “managed float” of the yuan was the first small step to change its status of this “hermit currency”;
* The approval, in 2011, of the latest 12th Five Year Plan for China’s socio-economic development;
* Plans to make yuan an “international currency” (no further details available yet);
* The reaching of agreements between China and a number of other countries on a transition to the use of national currencies in mutual trade including trade in natural resources;
* A statement by the central bank of Australia that it is planning on converting 5 percent of its international reserves into Chinese treasury bonds following successful talks with Beijing;
* The most important one: The agreement reached in October 2013 between Beijing and London that currency trading between the yuan and pound sterling will begin at the Royal Exchange, as well as the permission given by the British authorities to Chinese banks, allowing them to open up branches in the City of London.The agreement between Britain and China virtually involves London’s transformation into a kind of offshore company for Chinese banks and financial companies.
http://www.globalresearch.ca/china-reduces-its-us-dollar-holdings-the-geopolitics-of-forex-reserves-diversification/5360161
Gold Miners Analyst Watch: December Edition
Dec 3 2013, 16:43
Itinerant
includes: ABX, AEM, AGI, ANV, AU, AUQ, AUY, BGT, DUST, EGO, GDX, GDXJ, GFI, GG, GGGG, GLDX, GOLD, HMY, IAG, JDST, JNUG, KGC, MUX, NEM, NGD, NUGT, PPP, PSAU, RING, SBGL
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
It is time for the last gold miners analyst watch monthly update in this calendar year. As in previous articles of this series we will be noting price targets and target changes in comparison with results published in our last edition at the start of November.
We continue to consider the following stocks (in alphabetical order): Agnico Eagle (AEM), Alamos Gold (AGI), Allied Nevada (ANV), AngloGold Ashanti (AU), AuRico Gold (AUQ), B2Gold (BGT), Barrick Gold (ABX), Eldorado Gold (EGO), Gold Fields (GFI), Goldcorp (GG), Harmony Gold (HMY), IAMGOLD (IAG), Kinross Gold (KGC), McEwen Mining (MUX), New Gold (NGD), Newmont Mining (NEM), Primero Mining (PPP), Randgold (GOLD), Sibanye Gold (SBGL), Yamana Gold (AUY).
Most companies considered for this article are covered by more analysts than reported in our table since this article only considers analyst reports available through yahoo.com.
The table below summarizes our data. The first three columns list the company names, ticker symbols and share prices at the time of writing. Price targets (low, median and high) are listed in the following three columns. These targets are followed by a column giving the number of analysts providing data to Yahoo.com and the mean recommendations given by these analysts ranging from 1.0 (strong buy) to 5.0 (sell). This concludes the data sourced directly from Yahoo.com.
The following columns are colored in light green and contain data derived from our source data. These data points are given in percentages related to the share price at the time of writing. The column titled "median-price" gives the differences between the share price and the median target price. The column titled "high-low" gives the differences between the high and the low target. The last four columns titled "target change" document the changes in price targets since the November report with the last columns giving the average changes over the low, median and high price targets.
We usually keep an eye on the difference between the current share price and the median price target and interpret this difference as some measurement for the potential of a stock. This value is given in column "median-price" and the diagram below.
McEwen Mining has only got price targets supplied by one single analyst on Yahoo.com, but this analyst indicates more than 100% upside from current levels.
B2Gold is not far behind in terms of potential in this ranking and New Gold and Allied Nevada are also trading more than 60% below the median price target. Sibanye Gold is the only gold miner stubbornly trading above median price targets in our selection.
Column "high-low" measures the divergence in analyst opinions. The results from this column in the table at the top of this article are visualized in the next diagram.
Allied Nevada has analysts disagreeing the most with price targets gaping more than 200% of the current share price apart. Obviously there is still too much uncertainty with regards to the viability of the heap leach operation in Nevada among analysts.
The price target ranges for IAMGOLD, Newmont, New Gold and Randgold also diverge by more than 100%.
The analysts achieved the greatest degree of consensus with price targets for Sibanye Gold closely followed by B2Gold and Gold Fields.
Most companies had their price targets cut during the past month with notable exceptions being AngoGold Ashanti and Sibanye Gold.
The largest target reduction was noted for McEwen Mining, GoldCorp and Eldorado Gold.
On average targets were reduced by 7% since early November.
A visualization for column "Recommendation" concludes our report. The little red bars indicate recommendation changes since last month. B2Gold is still held in the highest regards by analysts followed by Primero Mining. AngloGold Ashanti received the largest upgrade during the past month. Allied Nevada and Sibanye Gold are still bringing up the rear. And the recommendation for IAMGOLD suffered the most.
Parting Shot
The gold price is trending towards a test of June lows as we are writing this article and cost control will continue to be the main theme as we go into 2014. Gold miners have been curtailing their all-in sustaining costs as documented here, and this trend will need to continue in order to provide margins and cash flow. Hopefully once the ongoing gold price correction is done and dusted there will be a set of lean companies to choose from which will be well positioned to reap the benefits from the next bull run.
http://seekingalpha.com/article/1874951-gold-miners-analyst-watch-december-edition
Silver Miners Analyst Watch: December Edition
Dec 4, 2013
by: Itinerant
includes: AG, BCEKF, CDE, EXK, FSM, GPL, HL, PAAS, SSRI, SVLC, SVM
Disclosure: I am long AG, EXK, SVLC, HL. (More...)
Editors' Note: This article covers one or more micro-cap stocks. Please be aware of the risks associated with these stocks.
As the year is winding down, we are providing our last monthly update on silver analyst price targets for primary silver mining companies in 2013. As in previous installments, we are summarizing our observations of analysts' price targets as published on Yahoo.com. In the present December edition, comparisons will be made to the data presented roughly a month ago in our November summary.
As always, we would like to take note of the fact that most companies considered for this article are covered by more analysts than reported in our data since this article only considers analyst reports available through Yahoo.com.
As in previous reports, we included the following silver miners in alphabetical order: Coeur Mining (CDE), Endeavour Silver (EXK), First Majestic Silver (AG), Great Panther Silver (GPL), Fortuna Silver Mines (FSM), Hecla Mining (HL), Pan American Silver (PAAS), Silver Standard (SSRI), Silvercorp Metals (SVM) and SilverCrest Mines (SVLC). And we would like to welcome Bear Creek Mining (OTCPK:BCEKF) as a new entry in our watch list.
The table below summarizes our data. The first three columns list the company names, ticker symbols and share prices at the time of writing. Price targets (low, median and high) are listed in the following three columns. These targets are followed by a column giving the number of analysts providing data to Yahoo.com and the mean recommendations given by these analysts ranging from 1.0 (strong buy) to 5.0 (sell). This concludes the data sourced directly from Yahoo.com.
The following columns are colored in light green and contain data derived from our source data. These data points are given in percentages related to the share price at the time of writing. The column titled "median-price" gives the differences between the share price and the median target prices. The column titled "high-low" gives the differences between the high and the low targets. The last four columns titled "target change" document the changes in price targets since the November report with the last column giving the average change over the low, median and high price targets.
Shares trading significantly below the median price target can be viewed as having a greater potential than shares trading close to this target and values in column "median-price" can give some indication on the potential of a stock. A diagram visualizing this difference between the medium price target and the current share price is given below. We would like to caution that this way of thinking does not apply for companies that have had significant events moving the share price in recent times since analysts will take their time to update their data accordingly.
According to analysts, Bear Creek Mining has the greatest potential of the companies included in this review. Shares of this company are trading more than 100% below the median price target. This company is still an explorer, so the risk profile differs from producing companies in our watch list.
Silvercorp Metals, Silvercrest Mines, Fortuna Mines and First Majestic Silver all trade more than 60% below the median price target. At the other end of the range, we note PanAmerican Silver currently trading with little upside as far as analysts are concerned.
The difference between the high and the low targets represents a measure for the divergence in analyst opinions. Column "high-low" documents this difference and the diagram below visualizes it. This divergence in analyst targets is still greatest for Coeur Mining and Silver Standard. Analysts are 100% in agreement as far as price targets for Great Panther Silver are concerned. Very little divergence in analyst opinions is also observed for Silvercorp Metals.
Column "target change average" lists the average change in price targets during the past month and the diagram below illustrates them.
First Majestic Silver seems to have fallen out of analysts' favor and suffered a major price target cut. Target changes for the other companies were modest in comparison. On average, price targets were cut by -4.3% during the past month.
The final diagram illustrates column "Recommendation" from the table above. The little red bars in this diagram indicate changes in analysts' recommendation from last month.
Fortuna Silver has joined First Majestic Silver in pole position in this ranking and PanAmerican Silver is apparently the least-liked silver miner by analysts. The only change in recommendation observed since last month is a slight improvement for Silver Standard.
Passing Shot
2013 has been a difficult year for the silver mining sector. The silver price has fallen to multi-year lows and has played havoc with margins. And adding insult to injury, the Mexican tax reform is coming at probably the worst possible time and will make life for most companies in our watch list even more difficult going into 2014.
Much effort has gone into keeping these companies afloat and making them profitable under volatile market conditions. Although the current outlook is for more of the same, one can at least put a wish for higher and more stable silver prices in 2014 on Santa's list.
http://seekingalpha.com/article/1876121-silver-miners-analyst-watch-december-edition?source=email_authors_alerts&ifp=0
Nov. 27, 2013, 6:31 a.m. EST
NXT Energy Announces US $1.1 Million SFD(R) Survey Contract in the USA
Highlights - NXT signs US $1.1 million SFD(R) survey contracts with Kerogen Exploration - Contract covers two resource plays in the continental USA
CALGARY, ALBERTA, Nov 27, 2013 (Marketwired via COMTEX) -- NXT Energy Solutions Inc. ("NXT Energy" or the "Company") (tsx venture:SFD) NSFDF -0.62% announces that it has signed contracts with a new client, Kerogen Exploration LLC ("Kerogen"), to conduct two pilot SFD(R) surveys in Texas and Florida, USA, totaling US $1.1 million.
Kerogen is a private company financed by Riverstone Holdings LLC, and operates in Texas and Florida, holding 100,000 acres in Texas in the Permian Basin and 125,000 acres in the South Florida basin. Murray Grigg, Kerogen's President and CEO noted "We are pleased to apply this new technology to our unconventional play effort".
George Liszicasz, NXT's President & CEO noted "This is a great opportunity to build our presence in the USA, as well as build on our prior shale basin experience in North America. We are pleased to add Kerogen as a new client to our expanding customer base, and to have the opportunity to conduct these pilot surveys to explore for both traditional and resource plays. We look forward to working with Kerogen to become an integral part of their future on-shore and off-shore exploration programs."
NXT Energy continues its efforts towards finalizing the terms of other near-term survey opportunities in Central and Latin America and will seek to co-ordinate the timing of the Kerogen surveys as soon as practical in conjunction with one of these other potential projects.
NXT Energy also advises that it will be presenting at the upcoming annual LD Micro VI: Main Event Conference to be held in Los Angeles, California at the Luxe Sunset Hotel on December 3-5, 2013. LD Micro publishes a by-invitation newsletter, and focuses on compelling micro-cap (under $500 million) value and growth stocks.
NXT Energy Solutions Inc. is a Calgary based company whose proprietary Stress Field Detection ("SFD(R)") survey system provides an effective and reliable method to reduce time, costs, and risks related to hydrocarbon exploration. The SFD(R) system utilizes quantum-scale sensors to detect gravity field perturbations in an airborne exploration survey method. SFD(R) can be used both onshore and offshore to remotely identify areas with exploration potential for traps and reservoirs, and enables our clients to focus their hydrocarbon exploration decisions concerning land commitments, data acquisition expenditures and prospect prioritization on areas with the greatest potential. SFD(R) is environmentally friendly and unaffected by ground security issues or difficult terrain, and is the registered trademark of NXT Energy Solutions Inc.
Forward-Looking Statements:
This news release may include forward-looking statements. When used in this document, words such as "intends", "plans", "anticipates", "expects" and "scheduled", are forward-looking statements. Forward-looking statements are subject to a wide range of risks and uncertainties, and although the Company believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will be realized. Any number of factors can cause actual results to differ materially from those in the forward-looking statements. Risk factors facing NXT are described in its most recent MD&A for the year ended December 31, 2012 which has been filed electronically by means of the System for Electronic Document Analysis and Retrieval ("SEDAR") located at www.sedar.com. Such forward-looking statements are made as at the date of this news release, and the Company assumes no obligation to update or revise them, either publicly or otherwise, to reflect new events, information or circumstances, except as may be required under applicable securities law.
Specific forward-looking statements include the estimated timing of the contract. Specific risk factors include the weather conditions, regulatory permits, and other local factors which may adversely impact the Company's ability to conduct the survey contracts.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) nor the OTC Exchange accept responsibility for the adequacy or accuracy of this release.
SOURCE: NXT Energy Solutions Inc.
http://www.marketwatch.com/story/nxt-energy-announces-us-11-million-sfdr-survey-contract-in-the-usa-2013-11-27-61733113?reflink=MW_news_stmp
Time for Banks to Be Banks, Not Hedge Funds or Slush Funds; Free Money Math vs. 100% Gold Backed Dollar
Nov. 27, 2013
Mike Shedlock
Globaleconomicanalysis.blogspot.com
In the wake of all the misguided pleas for negative interest rates in Europe (hoping to get banks to lend), comes news US banks warn Fed interest cut could force them to charge depositors.
Leading US banks have warned that they could start charging companies and consumers for deposits if the US Federal Reserve cuts the interest it pays on bank reserves.
Depositors already have to cope with near-zero interest rates, but paying just to leave money in the bank would be highly unusual and unwelcome for companies and households.
The warning by bank executives highlights the dangers of one strategy the Fed could use to offset an eventual “tapering” of the $85bn a month in asset purchases that have fuelled global financial markets for the last year.
Minutes of the Fed’s October meeting published last week showed it was heading towards a taper in the coming months – perhaps as soon as December – but wants to find a different way to add stimulus at the same time. “Most” officials thought a cut in the interest on bank reserves was an option worth considering.
Executives at two of the top five US banks said a cut in the 0.25 per cent rate of interest on the $2.4tn in reserves they hold at the Fed would lead them to pass on the cost to depositors.
Banks say they may have to charge because taking in deposits is not free: they have to pay premiums of a few basis points to a US government insurance programme.
“Right now you can at least break even from a revenue perspective,” said one executive, adding that a rate cut by the Fed “would turn it into negative revenue – banks would be disincentivised to take deposits and potentially charge for them”.
Other bankers said that a move to negative rates would not only trim margins but could backfire for banks and the system as a whole, as it would incentivise treasury managers to find higher-yielding, riskier assets.
About half of the reserves come from non-US banks that do not have to pay the deposit insurance fee. Their favourite manoeuvre is to take deposits from money market funds and park them overnight at the Fed, earning millions of dollars risk-free. Cutting the interest on reserves would stop that.
Reserves
Free Money Math
The Fed pays .25% interest on excess reserves.
A quarter of a percent on $2.4 trillion happens to be $6,000,000,000 (six billion) annually.
Time for Banks to Be Banks, Not Hedge Funds or Slush Funds
Printing money that just sits overnight at the Fed allowing banks to make risk-free profits on $2.4 trillion in excess reserves is of course ridiculous.
It is also ludicrous for banks to complain about the take-away of free money that it should not be getting in the first place.
The Fed has so distorted the economy that no true pricing mechanism exists on anything.
Should banks feel the need to charge depositors interest on deposits, then so be it. That's the way it should be in the first place.
100% Gold Backed Dollar
In a true free market economy, with a 100% gold-backed dollar (where one dollar represented a fixed amount of gold, as opposed to a fixed price of gold), banks would of course charge a fee for safekeeping and other services.
The closer we get to that model the better, regardless of complaints by banks or others.
Notice the emphasis on safekeeping.
A 100% gold backed dollar would not stop lending. It would stop fractional reserve lending, lending of money in demand accounts, and lending of money for greater terms than the bank has use of funds.
Banks could not lend money available on demand (checking accounts), but they could lend money in interest bearing accounts such as CDs, for the term of the CD.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Read more at http://globaleconomicanalysis.blogspot.com/2013/11/time-for-banks-to-be-banks-not-hedge.html#lFho4StvHTcjPoYU.99
Physical Silver: How To Stack With Stealth
Nov 27,2013
Biz Blutree
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
"…when this thing really gets going, the silver price is just going to explode."
- John Embry, Sprott Global Assets
I like the sound of that. Though silver spot price has been in a sub-20 sideways slumber the past two weeks, and could slip even lower, with some saying another steep decline is possible, I'm buying all the way down. Silver's true value suggests its price has nowhere to go but up.
Slowly people are realizing this as an inevitability and putting their hands on the real stuff in increasing numbers.
If you stack silver and you know why you stack silver, welcome to the new 1%, this article is written for you.
If you're not interested in stacking silver and don't agree in an importance to do so, you may feel you've misspent your time reading here.
If you agree that transferring paper currency into physical silver makes sense as an alternative savings account outside the banking system, you too may agree; like a fine wine, no silver shall be exited before its time.
The basis for that sound reasoning is echoed in one reader's comment from another article who after talking about the Cypriot bank bail-ins, said:
"Screw the banks. If I'm forced to store my own cash because the banks are so irresponsible, the logical solution is to convert paper to metal."
Welcome to the new 1%
No one knows for sure the percentage, which is one of the beautiful things about stacking the physical - it's a private practice - but I've heard say only two percent of Americans hold physical silver and gold.
We're focusing on silver - let's get into it
Some readers agree stacking silver makes sense, yet they ask, "What is the best way?" Is it hold-in-your-hand bars or rounds from Sunshine Mint or Engelhard? Should I accumulate government minted silver bullion coins? Which ones? Where do I buy? Is this a good deal on eBay?
To address these questions the best way I know how is to outright show you Bluetree's method of silver stacking and where and what I buy. I should also have my head examined. I hope this is helpful.
Note: you are wise to avoid buying precious metals on eBay, and also to be aware the best and most reliable dealers don't need to advertise on TV.
In discussing Bluetree's method,
We will discuss what to have and to hold and where to buy. Not how to keep it safe or how to protect. That's personal.
You already know why you stack so let's focus on getting your hands on the best stuff at the best prices.
For purpose of this discussion, we begin:
*One ounce of silver bullion means one troy ounce, weighing 31.1 grams (same for gold) and generally minted in three nine (999) purity, although the Royal Canadian Mint produces four nine (9999) pure silver bullion coins.
*The lowest measure of purity still to be considered "bullion" is 92.5, which is Sterling Silver - though I don't buy it. 90% silver coins fall shy of bullion status.
*A coin can only be called a coin when issued by a sovereign government. A planchet of silver pressed at a private mint is not legally a coin and must be advertised as a round.
The Bluetree Method
In the spirit of privacy I prefer three specific one-ounce, silver bullion coins that carry exemption from IRS 1099B reporting. Before I go any further - I am not a tax professional or financial planner and by law cannot advise you. The examples in this article are my own thought-based strategies. I suggest consulting a tax professional before adopting my ways for my reasons.
But, exempt from 1099B? Yes.
I've learned over time through help from credible sources (confirming one here for purpose of this article) that if you sell 1,000 or more ounces of silver to a dealer, he is obligated to fill out form 1099B and report the transaction in his IRS filings, unless the sale involves one of the following three exempt silver bullion coins: the American Silver Eagle, the Canadian Silver Maple Leaf or the Austrian Silver Philharmonic. (You will notice compliance differs slightly for gold)
On the other hand, if 1,000 or more ounces of silver bullion is sold to a dealer in the form of privately minted silver rounds or any sized silver bars, or even other government minted bullion coins; Mexican Libertads, British Britannias, Australian Perth Mint Koalas, Kookaburras, etc. and Chinese Pandas among others, a 1099B form is to be filled out and submitted with the tax filings of the commercial buyer.
Good-bye, privacy. Hello, capital gains.
But, of course, that's only if you intend to sell your silver to a dealer, which I have no intention of doing.
If your strategy involves trading high valued silver assets up to another asset class within the correct market time frame to realize new wealth, you can stack any form of silver you prefer.
Personal, the nuances of play will differ for everyone. But, for as important to me the legal, stealth aspect of exiting silver, a comfort level exists buying and holding my silver in these three Cadillac coin types.
#1 The American Silver Eagle, first issued in 1986, is the only one ounce silver bullion coin denominated in USD and carries a $1 face value. American Silver Eagle coins are the most popular silver bullion coins in the world and are said to be minted exclusively using silver mined in the United States.
The obverse of each American Silver Eagle features Adolph A. Weinman's Walking Liberty design, which was used on U.S. half dollar coins that circulated from 1916 to 1947. The obverse is also inscribed with the words LIBERTY, IN GOD WE TRUST and the date.
The reverse of each American Silver Eagle features Chief Engraver, John Mercanti's bald eagle design paying homage to the Great Seal of the United States as the eagle hovers beneath 13 stars holding an olive branch and arrows in its talons. The coin is inscribed with the words UNITED STATES OF AMERICA, 1 OZ. FINE SILVER, and ONE DOLLAR.
2012 American Silver Eagle coin, obverse. Photo: providentmetals.com
ASE coins contain one troy ounce of 999 fine silver and can be purchased from a reputable online dealer individually, in stacks of 20 (lowering the premium) in an official U.S. Mint tube, or in lots of 500 coins stacked in 25 tubes master packed in a green U.S. Mint monster box. Monster boxes are unopened and strap-sealed by the mint. Buying this amount will incur the lowest premium per ounce over spot.
Note: In the spirit of privacy remain aware that whether for purchase of silver, a new car down payment or a deposit in your bank account, $10,000 is an IRS reportable transaction.
I comply with all tax laws and do not suggest anyone do otherwise. Rule of thumb: adhere to the law and sleep better at night in your own bed.
#2 The Austrian Silver Philharmonic, first issued in 2008, is the only one ounce silver bullion coin denominated in EURO and carries an E1,5 face value.
2009 Austrian Silver Philharmonic coin, obverse. Photo: prividentmetals.com
ASP coins contain one troy ounce of 999 fine silver and can be purchased from a reputable online dealer individually, in stacks of 20 in an official Austrian Mint tube, or in lots of 500 coins stacked in 25 tubes and master packed in a black Austrian Mint monster box. Monster boxes are unopened and strap-sealed by the mint. Buying this amount will incur the lowest premium per ounce over spot.
Celebrating the Vienna Philharmonic Orchestra the obverse of this coin features the iconic Great Organ housed inside the Golden Hall of Vienna, Austria and inscribed with REPUBLIK OSTERRIECH, 1 UNZE FEINSILBER, the date and 1,50 EURO. The reverse of each coin depicts a bouquet of orchestral instruments; a string bass surrounded by cellos and violins, bassoon, harp, and Viennese horn.
#3 The Canadian Silver Maple Leaf, first issued in 1988, is a one ounce silver bullion coin denominated in Canadian dollars and carries a CD5 face value.
Canadian Silver Maple Leaf coin, reverse. Photo: providentmetals.com
CSML coins are extra special as they contain one troy ounce of four nine (9999) fine silver and can be purchased from a reputable online dealer individually, in stacks of 25 in an official Royal Canadian Mint tube, or in lots of 500 coins stacked in 20 tubes and master packed in a yellow Royal Canadian Mint monster box. Monster boxes are unopened and strap-sealed by the mint. Buying this amount will incur the lowest premium per ounce over spot.
Perhaps one of the most trusted bullion coins on earth, and hailed as the world's first pure bullion coin, the Canadian Silver Maple Leaf features Canada's iconic national emblem, the five point maple leaf and the markings CANADA 9999 Fine Silver 1 oz. Argent Pur on its reverse. The current obverse depicts the Susan Blunt design of an elder Queen Elizabeth II, the face value "5 Dollars" and the date. Coins dated earlier feature the image of a younger Queen Elizabeth II.
Modern Numismatics - Graded & Certified Bullion Coins
Also a coin collector, I own several graded and certified pieces. But, would suggest unless you enjoy owning these for their flawless beauty and perfect MS 70 pedigree don't rely on them for your stacking strategy. Not cost efficient costing three times and more their raw coin counter parts.
I have stopped pursuing graded and certified coins as they no longer align with my goals. In the end if silver is priced the moon, I doubt these slabbed coins will fetch the stars based on their numismatic value.
Similarly, Morgan and Peace silver dollars (1878-1901 and 1921-1935) are fun to collect and beautiful to behold, but, I no longer pursue them. Some date back 135 years and I'll probably hold on to them for their history, but they're not for stacking as each silver dollar weighs less than an ounce of silver at .7734 troy, but cost more than the full ounce modern silver bullion coins.
Pre 1965 "Junk Silver" U.S. circulated coins dimes, quarters, and halves up to and including 1964 contain 90% silver (including the first year of the Kennedy Half Dollar). Also known as constitutional money, junk silver is an important staple if you're stacking for the same scenario, though you'll be hard pressed to find these in circulation today. To obtain junk silver one can hunt bank coin rolls (deposited by bank customers) if you have the time and feel lucky, or you can buy them from a reputable online dealer. I see these coins as functional in a barter situation and for small transactions, etc. as they are fractional and easily recognizable.
Note: Each $1 (face value) of these 90% silver coins contains about .715 of a troy ounce of silver. For my own purpose I look at 14 dimes as about one ounce silver, 12 quarters as about two ounces silver, etc.
Don't be fooled
Note: The 1965 to 1970 Kennedy half dollar coins are clad of 40% silver. And it should also be noted, the short-lived Eisenhower dollars that are clad of 40% silver (very few) - 1971 to 1974 with S mintmark only - are mostly found in proof sets as these coins (with silver content) were minted with the coin collector in mind. There were many more Iike dollars minted for circulation in those years bearing the S mintmark clad of cupro-nickel (like modern coinage) containing NO silver.
Where do I buy?
You may already use an honest and reliable, customer-centric, bullion and coin dealer. I say great. That's half the equation in this endeavor. If you do not have such a dealer, here is my choice, Provident Metals. I also use APMEX from time to time. (I receive NO compensation from either dealer)
Conclusion: If it takes 13 or so ounces of gold to equal the Dow and some 62 ounces of silver to equal one ounce of gold when historically the silver to gold ratio has been 50:1, 16:1, 15:1, 10:1 and even 1:1 in ancient Egypt, what is silver's true mean?
We may never know, however, silver's true value - its purchasing power - should become obvious.
http://seekingalpha.com/article/1867231-physical-silver-how-to-stack-with-stealth
The Punch Line: The Complete Macroeconomic Summary And All The Chart To Go With It
Tyler Durden on 11/26/2013 21:29 -0500
From Abe Gulkowitz' The Punch Line
Meager Growth but the Market Roars…
An interim deal on Iran’s nuclear program pushed oil prices lower and sent global equities higher as investors’ risk appetite rose on an easing of some Middle East tensions. As we close in to year-end and the start of a new year, one finds little evidence of serious inflationary concerns. Indeed, the opposite is feared.
Major economies face debilitating deflation pressures. In Europe, for example, the latest annual inflation statistics fell in twenty-three Member States, remained stable in one and rose in only four. The HSBC/Markit Flash China PMI came in at 50.4 in November, marking a two-month low and missing expectations. The survey still indicated that the Chinese economy is expanding but it also raised fears that growth may be tailing off in the fourth quarter. China will be lucky if it manages to hit its official target of 7.5% growth in 2013, a far cry from the double-digit rates that the country had come to expect in the 2000s.
Growth in India (around 5%), Brazil and Russia (around 2.5%) is barely half what it was at the height of the boom. In Europe, the Markit Flash Eurozone PMI fell from 51.9 to 51.5, the lowest reading for three months. The French index was particularly weak – the PMI was at its lowest level since June. Germany continued to improve but the rest of the eurozone seems to be languishing. Questions abound whether the EU risks following the path carved by the sluggish Japan in the 1990s. Yet financial assets point to a worrisome asset inflation environment. Many have written off the likelihood that the Federal Reserve would begin QE tapering this year.
As stocks hit new records and small investors—finally—return to the market, some analysts are getting worried. Risk assets have rallied to previous bubble conditions. Powered by unprecedented refinancing and recap activity, 2013 is now the most productive year ever for new-issue leveraged loans, for example. This has been great for corporations as financing and refinancing has put them on a stronger footing. Where M&A activity still lags the highs of the last boom, issuers have jumped into the opportunistic pool with both feet. And why not? Secondary prices are high and new-issue clearing yields remain low. Yet very inadequate movement has been evidenced on the hiring front.
And after all the improvement in ebitda, where do we go from here? Forward guidance will clearly be harder. One might argue that we are back in a Goldilocks fantasy world, where the economy is not so strong (as to cause inflation and trigger serious monetary tightening) or so weak (as to cause recession and a collapse in profits) but "just right". Yet, it seems unlikely that issuers with weaker credit quality could find it so easy to sell debt without the excess liquidity created by the Fed and other central banks.
Weaning everyone off the “liquidity fix” may be tough!
The full Punchline including 17 pages of off the charts that's fit to print below (pdf)
http://www.zerohedge.com/news/2013-11-26/punch-line-complete-macroeconomic-summary-and-all-chart-go-it
“Wave Of Disaster” Threatens U.S. Mortgage Market; OECD & IMF Warn UK
-- Posted Wednesday, 27 November 2013
Goldseek.com
Today’s AM fix was USD 1,250.75, EUR 919.80 and GBP 767.99 per ounce.
Yesterday’s AM fix was USD 1,250.75, EUR 923.88 and GBP 773.69 per ounce.
Gold fell $6.70 or 0.54% yesterday, closing at $1,242.10/oz. Silver slid $0.17 or 0.85% closing at $19.85/oz. Platinum fell $16.94 or 1.2% to $1,367.30/oz, while palladium dropped $3.25 or 0.5% to $715.47/oz.
Gold is higher today in London. There is speculation that lower prices, which fell to a four-month low, will lead to increased physical demand. Prices fell to $1,225.55/oz on Monday after another massive sell order led to trading being suspended for 20 seconds for the third time in less than a week. $1,225.55/oz was the lowest since July 8.
S&P/Case-Shiller Composite-20 Home Price Index Not Seasonally Adjusted
The German regulator has joined the British Financial Regulator and is opening up an examination of the gold and silver price ‘setting’ at banks.
The German financial markets regulator is scrutinizing gold and silver price setting operations at individual banks alongside other benchmark processes including Libor and Euribor, Bafin spokesman Ben Fischer told media. Bafin declined to elaborate on the status of the investigation or the banks involved.
Despite the very poor sentiment after recent price falls, gold's fundamentals are actually quite sound.
Global physical demand is set to be very high again this year and may even reach a new record, despite the 25% price fall.
This is especially the case, as Chinese demand is set to be a new record this year despite the recent slight decline in demand. China’s net imports of gold from Hong Kong alone in October reached the second-highest level on record last month. This does not include direct imports from Australia, Africa, Vietnam and other countries.
Indeed, Chinese demand this year looks set to be a new record for the highest gold demand from one country in one year ever. It is important to look at the aggregate annual demand figures rather than the ebb and flows of weekly and monthly data which can mislead.
Momentum and technical traders are dominant at the moment and with the short term trend down, gold may incur further losses in the short term.
However, the smart money is gradually accumulating on the dips. Dollar cost averaging remains prudent for investors who wish to get exposure to bullion but are concerned about further price falls.
Gold in US Dollars - 5 Year
U.S. borrowers are increasingly missing payments on home equity lines of credit they took out during the housing bubble, a trend that could deal another blow to the country's biggest banks according to Reuters Insight.
It would likely also deal another blow to the U.S. property market and the fragile U.S. economy.
Bank of America, JP Morgan and Wells Fargo appear to be the most exposed - meaning that either taxpayers will again be asked to bail out banks or more likely the new bail-in regime will confiscate cash from depositors.
From Reuters:
The loans are a problem now because an increasing number are hitting their 10-year anniversary, at which point borrowers usually must start paying down the principal on the loans as well as the interest they had been paying all along.
More than $221 billion of these loans at the largest banks will hit this mark over the next four years, about 40 percent of the home equity lines of credit now outstanding.
For a typical consumer, that shift can translate to their monthly payment more than tripling, a particular burden for the subprime borrowers that often took out these loans. And payments will rise further when the Federal Reserve starts to hike rates, because the loans usually carry floating interest rates.
At a conference last month in Washington, DC, Amy Crews Cutts, the chief economist at consumer credit agency Equifax, told mortgage bankers that an increase in tens of thousands of homeowners' monthly payments on these home equity lines is a pending "wave of disaster". In terms of loan losses, "What we've seen so far is the tip of the iceberg. It's relatively low in relation to what's coming," Equifax's Crews Cuts said.
UK Nationwide House Price Index - 1971 - Today
There are concerns about Britain’s property market too and the Organisation for Economic Co-operation and Development (OECD) warned of a UK property bubble last week.
The Paris-based group said, in its semi-annual Economic Outlook, that it was urgent to continue to relax the barriers to housing supply to prevent overheating in the property market. It ignored the fact that the nascent new bubble is in a large part due to near zero percent interest rates leading to renewed property speculation by buy to let investors.
The UK government’s Help to Buy program that aids buyers with smaller deposits has been criticized by the International Monetary Fund and politicians for potentially stoking a property bubble as it boosts demand.
Given the very fragile recovery, despite near zero percent interest rates in the UK and the U.S. and the uncertain international backdrop, property prices in both countries look vulnerable.
http://news.goldseek.com/GoldSeek/1385560800.php
Follow the Money: How Lobby Interests are Spinning Iran Nuclear Deal
Interview with Pepe Escobar
by grtv
Nov. 26, 2013
RMB well on its way to becoming a freely-traded currency: BoC (8:39)
Reuters Nov. 27 - Economic reforms are helping China's currency on its journey towards becoming freely-traded on the world markets, although foreign currency controls will remain, says Cao Yuanzheng, Bank of China Chief Economist
Video Link
http://www.reuters.com/video/2013/11/27/rmb-well-on-its-way-to-becoming-a-freely?videoId=274703035&videoChannel=5
Overlooked News Out Of China A Game Changer For U.S. Dollar
Nov 26 2013,
Russ Winter
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Several largely overlooked items came out of China this week. First, the Shanghai Exchange is moving toward trading in petro-yuan. As we have seen with gold, Shanghai is a very effective delivery based market. This helps set the stage for Saudi Arabia to disengage from its 1973 Petro-dollar agreement, which essentially involves selling oil in U.S. dollars in exchange for U.S. debt. In the last few years the Saudis have been the most aggressive country in the world in terms of adding to Treasury holdings, now holding a stash of $700 billion.
The alternative really doesn't seem so far fetched at this late stage: Simply begin selling oil to Europe and China in currencies other than the U.S. dollar. China is now Saudi Arabia's biggest oil customer. With the start up of the joint Sino-Saudi 400,000 bbd refinery at Yanbu next September, this promises to widen further.
It's important to note that China is already moving to buy all of its oil in yuan. So far, Russia, Iran and the UAE transact in yuan, while others have the option and await an opening. The new exchange will facilitate that. But as Libya's Gadhafi found out, putting forth a challenge (Gadhafi's Gold-money Plan Would Have Devastated Dollar) to the Petrodollar regime will end your life like some scene out of Beatlejuice.
I have to admit that because I believed Saudi-U.S. relations to be symbiotic, I haven't really focused much on the petro-dollar aspect of the Ponzi scheme. I believed that the U.S. going against the interests of both Israel and the Saudis on both Syria and Iran was unlikely. In fact I thought an operation against Iran was likely. But now I think Iran has nukes, maybe a half dozen small weapons, a fait accompli, so there is no need or urgency to make dozens more when your target is a confined area. I had also generally believed that a sudden, overnight collapse of the petro-dollar was a low-odds event. In reality, however, the petro-dollar system is becoming obsolete and can no longer be sustained. As such, the blood (dollars) supporting it will bled out in spurts.
So post-facto Obama has cut a deal with Iran to lift some sanctions, against the wishes of Israel and Saudi Arabia. This will cause a furor and fallout, and possibly speed the bleed out of petro-dollars. If China wants to buy in Yuan are the Saudis going to argue at this stage. That alone would take a big chunk out of the Petrodollar scheme's hide. A simple Google search reveals dozens of stories about this. An example is in the Daily Mail:
Upset at President Barack Obama's policies on Iran and Syria, members of Saudi Arabia's ruling family are threatening a rift with the United States that could take the alliance between Washington and the kingdom to its lowest point in years."
U.S.-Saudi relations are poor because Obama hasn't shown a willingness to engage in military operations like some hired mercenary. That's strange because Obama is a mercenary in every sense of the word. So I'm wracking my brain as to how this could be played out to somehow support the petro-dollar con. Perhaps now Israel and the Saudis will team up and take out Iran's facilities with the U.S. uninvolved and winking from arm's length?
If not, the end of petro-dollars and its recycling would mean an end to the era of cheap imports and super low interest rates for the U.S., and would also reset the global economy. Most major developed countries rely on oil imports, which are purchased using dollars, so they are forced to hold large stockpiles of dollars (estimated at 4-7 trillion) in order to continue importing oil. In turn, it also creates consistent demand for dollars and prevents the dollar from losing its relative international monetary value, regardless of what happens to the U.S. economy.
It could also mean that all the dollars printed up and afloat overseas to support Dollar petro purchases come flooding back into the U.S. and create severe inflation. Even beyond bad U.S.-Saudi relations, all of the incentives are in place for it to happen. With the trajectory of the money supply turning up, that could already be happening given that China-Iran and Russia are not playing petrodollar ball. The three month trend is running hot.
In addition to changes in Saudi Arabia, the petro-dollar is being steadily eroded by the gas pipelines out of the "Silk Road." Gas is not subject to petro-dollars terms and the countries with the product prefer non-U.S. currencies and even gold. This end runs U.S. dollar hegemony, and I will devote a separate post to this topic.
If China wants to buy oil in yuan, then it would be of benefit to buy it with a stronger currency. For China, buying in yuan instead of dollars is about the easiest, most low hanging fruit type of economic benefit on the menu. No doubt, its leadership has recognized that it could be helping the purchasing power of its own people rather than continuing to export goods to the U.S. in exchange for increasingly questionable, vendor-financed Treasury debt. Plus, it has the added perk of knocking the U.S. off of it perch. With ongoing political ineptitude and more fiscal Kabuki theater on the horizon, the timing is perfect for change -- and who would blame the BRICs for resetting the game? Now this little-noticed game-changing policy announcement came out of China this last week and ties everything together. This is logical if you are making a break from the petrodollar system:
'It's no longer in China's favor to accumulate foreign-exchange reserves,' Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will 'basically' end normal intervention in the currency market and broaden the yuan's daily trading range, Governor Zhou Xiaochuan wrote in a guidebook explaining reforms outlined last week following a Communist Party meeting."
The other begged question: If the Chinese are not going to add to foreign currency reserves, then what are they going to use instead? The answer is obvious: Gold. In fact, I would anticipate an acceleration of Chinese gold purchases well above the robust levels seen now. In actuality, this news seems to confirm what has been in play since last spring: No new Treasuries and huge gold purchases. This is not something to be lightly dismissed. I anticipate that as the petro-yuan and yuan in bilateral trade is launched in earnest, the PBoC will quietly announce the figures for it new gold tonnage. It will be much higher than the consensus.
http://seekingalpha.com/article/1862851-overlooked-news-out-of-china-a-game-changer-for-u-s-dollar
Banks look to charge for holding customers’ money, if Fed counters ‘lazy’ behavior
November 25, 2013, 5:12 PM
blogs.marketwatch.com
Bank customers could look forward to being charged to keep their money in U.S. banks.
That’s the latest threat coming out of Wall Street, according to a report in the Financial Times, as financial institutions look to combat a possible interest rate cut from the Federal Reserve on its bank reserves.
This latest potential step would be a hit to depositors, already earning close to zero interest on checking and savings accounts.
But the banks say it’s a side effect of the Fed’s quantitative-easing strategy and its eventual tapering of its asset purchases of $85 billion a month, which has created high liquidity within banks. The report cited executives at two of the top five U.S. banks, who said a cut in the 0.25 percent rate of interest on the $2.4 trillion in reserves they hold at the Fed would lead them to pass on the cost to depositors.
Federal Reserve Bank of St. Louis
If you look at the chart, the amount of cash held at the Fed used to be negligible but is now in excess of $2.3 trillion. The logic is that the Fed wants the banks to stop parking their “lazy cash” at the Fed and start doing something with it, say experts.
“From the Fed’s point of view, by discouraging banks from leaving their excess cash at the fed, they are encouraging banks to buy securities in the market (the same as the what they are doing with quantitative-easing purchases) or to go out into the market and make loans,” said Joshua Siegel, managing partner and CEO at StoneCastle Partners.
And banks, given their current capital requirements, can be a little riskier, and funds being deployed back into the market would be good for the economy, noted Siegel.
“My understanding is that banks are supposed to lend to make profit,” said Brad Hintz, analyst at Alliance Bernstein. “And not just recycle cash to the Federal Reserve.”
Savings accounts don’t actually cost that much to operate for banks, but checking accounts do actually cost a lot of money and have a great benefit to consumers. While customers do pay for these via minimum-balance requirements, when there is a low-interest environment, it’s not much revenue for banks.
In the last few years, the debit-fee legislation coming out of the Durbin Amendment as part of the Dodd Frank Act has limited transaction fees imposed on merchants by debit card issuers. That has effectively hit consumer-banking revenues pretty hard, say analysts.
But the interest on excess reserves was a temporary stop-gap measure allowing banks to earn interest by holding money at the Fed. What the Fed is now saying is that it was never meant to be permanent.
– Sital S. Patel
– Follow The Tell on Twitter @thetellblog
http://blogs.marketwatch.com/thetell/2013/11/25/bank-look-to-charge-customers-to-hold-their-money-if-fed-says-stop-being-lazy/
Zimbabwe Ben, Janet "von Havenstein" Yellen And The Taper That Will Never Happen
Nov. 25, 2013
Truthingold.blogspot.com
[T]he Federal Reserve’s long and large scale purchases have significantly lowered long-term Treasury yields. - Ben Shalom Bernanke, Keynote Speech at the 2012 Jackson Hole Federal Reserve Conference LINK
For those of you who are unaware, Rudolph von Havenstein was head of the German Central Bank during the infamous Weimar hyperinflation/currency collapse period (1921 - 1923). As most of you know, every German who had their wealth denominated in German marks on the night of November 13, 1923 woke up the next day to discover that their paper wealth was worthless. Gold, for all intents and purposes, went to infinity as measured in the German mark (gold began the Weimar Republic period at 170 marks and peaked at 87 trillion marks).
I mention this as background because, despite the Fed's lip service to the contrary about reducing QE (the "taper"), the Fed has no choice to not only continue printing money, but will soon be forced to increase its rate of printing. Make no mistake, this is going to get crazy and they will probably eventually start buying assets other than Treasuries and mortgages, such as municipal bonds, pension liabilities and equities.
I wrote an article for Seeking Alpha that seems to be getting a lot of attention around the internet on this subject:
Since Bernanke first uttered the word "taper" in mid-May, the financial media circus cycle of "they'll taper this time around" has been repeating itself before every FOMC meeting and after the subsequent release of the FOMC meeting minutes. And yet, the Fed continues to defer reducing its QE policy after every meeting despite constant overtures to the contrary. The truth is that reducing the level of QE right now would likely cause a repeat of the 2008 near-collapse of the financial system, hurling the economy into a serious depression.
You can read the entire piece here: Don't Fall For The Taper Talk - Again
The first indication that I may be on to something here is the price pattern of the U.S. dollar. Despite all the dollar bulls permeating the airwaves of financial media with their mindless drivel, this latest manipulated dead-cat bounce in the dollar appears to have run out steam pretty quickly:
As you can see from this chart, the USDX was unable to even bounce back up to its 200 day moving average in this latest dead-cat bounce. It appears ready to resume the nasty decline that began in July, after the Fed deferred tapering QE despite Zimbabwe Ben's threat to taper in May. In other words, the smart money (the Chinese, for instance) understands what's happening in this country and it (the smart money) is using every bounce in the dollar to dump (not just the Chinese, by the way).
For those who are unaware, Janet Yellen gave a policy speech in which she stated that negative interest rates may be necessary to stimulate employment. Just like Zimbabwe Ben's infamous "helicopter" speech in 2002, Yellen's speech offers insight into how she thinks about the implementation of monetary policy as a means of attempting to manipulate the economy. The USDX knows this. Most people who get their market news from CNBC or Bloomberg do not.
We are going to see higher rates that will kill the economy once and for all unless the Fed increases its bond buying program. The market is telling us that, not me. It's gotten so silly in terms of the perma-bull analysis - or what passes for analysis in this day and age - that I read an article over the weekend in which the money manager argued that higher interest rates would be bullish for the economy. Sorry pal, the only thing higher rates will signal is that the Fed is printing even more money in a desperate attempt to keep the bond and stock markets from collapsing. This may well drive the Dow higher, but please review the history of the Weimar Republic leading up to and including November 14, 1923 if you want to see how this ends. Here, I'll make it easy for you: LINK
What is even more frightening, especially given the degree of ramped up U.S. militarism, and the role played by the NSA in this, is to contemplate what happened in Germany after the Weimar Government collapsed...wouldn't it be diabolically ironic - in fact, tragically amusing - if Ben Shalom Bernanke and his successor, Janet Yellen, were the ones who ushered the U.S. into a similar type of Government that succeeded Germany's Weimar period...
POSTED BY DAVE IN DENVER AT 8:32 AM
http://truthingold.blogspot.com/
Are these Venezuela's gold bars? Probably not. But if you search Bloomberg's photo library for "gold bars" you get 24 pages of results. I don't know what to make of that. Source: World Gold Council via Bloomberg News.
What Is Goldman Sachs Doing With Venezuela's Gold?
By Matt Levine Nov 25, 2013 12:09 PM ET
Bloomberg
A while back Greece had a problem. The problem was that it wanted to borrow more money, but didn't want to increase its debt. (Because the European Union would frown on it having more debt.) So it went to Goldman Sachs, and Goldman told Greece, well, what you can do is borrow some money from us, but we won't call it debt, because something something something something swaps.
This worked pretty well for everyone, for a while: Greece got the money, but nobody outside the deal understood that it had borrowed the money, because it was part of a derivative trade that was not accounted for as debt. Then it stopped working, and everyone got mad at Greece for disguising its debt, and at Goldman for helping Greece disguise its debt and charging rather richly for the service.
Anyway last week Goldman said it was sorry and wouldn't do that any more:
Goldman Sachs Group Inc. (GS) Vice Chairman Michael S. Sherwood said his firm would refuse another deal like the derivative it sold Greece that masked the nation’s growing debt to help it meet European Union standards.
“We absolutely wouldn’t do a transaction like that today,” Sherwood, 48, said in an interview posted on Channel 4’s website yesterday in London. “There have been transactions of that ilk that have been presented to us by other European sovereigns that we’ve turned down because we felt there wasn’t the appropriate transparency surrounding them.”
I cannot entirely agree -- I'm sort of of the school of "if it's legal1 and it pays you a lot, you should do it" -- but there's probably a reason Sherwood is giving interviews about reputational risk and I'm a blogger.
But a hedge fund reader points me to an intriguing modern parallel, or at least the rumor of one.2 Venezuela, it seems, has a problem.3 In its foreign currency reserves, where most countries keep foreign currency, Venezuela has a lot of gold, because its late President Hugo Chavez really liked gold and wanted to "move away from the 'dictatorship of the dollar.'" It has rather fewer dollars, and it turns out that if you want to buy goods and services in international trade, dollars are more useful than gold.4 Thus the problem.
The normal way to solve that problem is to sell some gold to someone who has dollars. Then you'll have less gold, but more dollars, and the dollars can be used to buy goods and services. But if you're Venezuela, there are problems with this too. For one thing, it seems like sort of a repudiation of your late president's policies. For another thing, spending down your gold reserves might suggest that you're in a bit of a tight spot financially, which though true is awkward.
Also, gold was worth $1,800 an ounce a year ago and is now worth like $1,240 an ounce, so it feels sort of crummy to sell a bunch now.
In comes, apparently, Goldman Sachs? Here is a thing that seems to be happening:
Venezuela newspaper El Nacional reported Tuesday that Venezuela’s Central Bank and Goldman Sachs are ready to sign an agreement to swap or exchange international gold reserves with a start date in October 2013 until October 2020.
The negotiated amount is equivalent to 1.45 million ounces of gold, valued at US$1.8 billion at today’s prices, which is to be deposited in the Bank of England with the transfers made directly to Goldman Sachs once delivery times are stipulated. Goldman Sachs will then pay U.S. dollars for the gold.
An adjustment of 10% will be made to the asset value as a hedge in case the international gold market price falls. The annual interest rate will be a combination of dollars with the call BBA Libor equivalent to 8%.
Do you know what this means? I do not (here's El Nacional's version, in Spanish but not significantly clearer), but it would seem to be a margin loan against the gold; i.e. something like:
1. Venezuela is borrowing about $1.6 billion from Goldman for seven years.
2. Venezuela is collateralizing that borrowing with gold worth $1.8 billion at today's prices (i.e. it's 90 percent of the value of the gold; that's the 10 percent haircut), and it's posting that collateral somewhere Goldman can get it (the BoE).
3. The collateral will be subject to margin calls as the price of gold increases or decreases.5
4. Venezuela is paying about 8 percent a year for this loan.6
So is that a good deal for Venezuela? It depends how you count but it's hard to imagine the answer is yes. I mean: Why would Goldman do it if the answer was yes? There are some other arguments below but that is surely the main one.7
Because, if true, this is not the most pristine deal you ever will see! (Goldman declined to comment.) I mean, one, Venezuela -- it inspires people to feel feelings, plus you might have some weird dynamics around actually getting them to post margin.8 Two, complex derivatives etc. -- more feelings, though despite the word "swap" here, my best guess about what is going on here is that it is really just a secured loan and so barely a derivative at all.
Three, ask yourself, what is the purpose of this trade? I won't tell you the answer, because I don't know, but it sure seems to be for Venezuela to get some money for its gold without "selling" it. Which is the sort of sleight of hand that, as a bank, in 2013, you might want to avoid. Unless, again, it pays well.
1 Sherwood goes on, as well he might: "I’m not talking about legality here. Everything we did we felt was legal, but here we’re talking about what’s appropriate and what’s reputationally sensitive."
2 Here is an article from the Caracas newspaper El Nacional. Here is an article in English from Mineweb. Here is a post on Zero Hedge. So! There you go!
3 Multiple problems, apparently, but let's focus on this one.
4 Disagree? Let it all out in the comments. The important point is that neither is as useful as bitcoins.
5 Not in the bit I quoted, but in El Nacional:
Durante la vigencia del instrumento se constituye una cuenta llamada “de margen”, en la que el BCV se compromete a depositar una mayor cantidad de oro en el caso de que el precio del metal caiga o en la que Goldman Sachs depositará divisas cuando la cotización del oro aumente. “Al vencimiento de la transacción los aportes realizados son devueltos a sus propietarios”, señala el documento.
You get the idea.
6 I don't know what the Libor reference means. Plausibly Venezuela is paying Libor + 600 basis points; 7-year swaps are around 2.15 percent so 7yL+600bps is a bit over 8 percent.
7 I see 5-year credit default swaps on Venezuela at around 1200bps. There's a 2022 USD bond (ISIN USP17625AC16) yielding around 14 percent. So figure Venezuela's unsecured 7-year rate is around 13 percent. It's paying 8 percent. It's saving 5 percent a year in exchange for collateralizing 111 percent of the money it's getting with physical gold and posting margin if that collateral's value drops. Doesn't seem great.
One way to look at it is that this Venezuela could just sell 1.45 million ounces of gold for $1.8 billion and spend some of the money to buy call options on the gold price. Plugging in a 7-year term to XAUUSD OV in Bloomberg, and leaving all other fields at their default settings, I see an at-the-money call being worth about 25.5 percent of spot. So you can buy at-the-money call options on the full 1.45 million ounces, giving you all of the gold upside that you have now, for about $460 million. That's just over three years of interest on this deal -- and you've got no downside risk and no margin calls. Math:
Source: Bloomberg. Confidence in pricing: low. (That's confidence in my filling out fields correctly, not in the calculator.)
Source: Bloomberg. Confidence in pricing: low. (That's confidence in my filling out fields correctly, not in the calculator.)
Obvious caveats are (1) you probably can't actually buy $1.8 billion of long-dated at-the-money call options at the Bloomberg-default price, or possibly at all, (2) there's something reassuring about holding an actual pile of gold that you can't quite replicate with a call option, and (3) I've probably messed up the math. Still this deal seems pretty rich.
8 Because socialism. Also because the risk is wrong-way: They have to post margin when gold prices fall, and a lot of their foreign reserves are in gold, so you're gonna be asking them for margin at particularly bad times.
http://www.bloomberg.com/news/2013-11-25/what-is-goldman-sachs-doing-with-venezuela-s-gold-.html
Dynacor: My Top Overall Stock Pick For 2014
Nov 24 2013
Steve Nicastro
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OTC:DNGDF over the next 72 hours. (More...)
Dynacor Gold (OTC:DNGDF) remains one of the most undervalued, unknown companies in the gold sector, but I think investors are slowly starting to catch on to the story.
I first wrote about Dynacor in an article on Sept. 5 when the shares traded at $1.42. Since then, Dynacor reported outstanding Q4 earnings results and the shares have rocketed higher to $1.68 a share, outperforming nearly every other gold stock on the market.
Still, Dynacor remains an incredible value and several key catalysts await which could send shares even higher. Dynacor is my top pick among the gold sector in 2014 and I will try to convince investors below.
Company Information
Dynacor has 36,316,111 shares outstanding. With a current share price of $1.62, the company has a market cap of $58.69 million. The company had cash on hand of $10.3 million at the end of the quarter and virtually no debt, so Dynacor has a current enterprise value of about $48 million.
The 52-week range for the share price is $.82 - $1.67. Average trading volume on the OTC markets is 8,575, which means the stock is very thinly traded. On the TSX, the stock trades under DNG.TO, and volume is higher at 42,650.
Dynacor is Outperforming the Market; Technicals Remain Bullish
You will see in this chart below that shares of Dynacor are up 30 percent on the year. Meanwhile the (GDX) Gold Miners Index is down 50 percent and the (GLDX) Gold Explorers Index is down around 70 percent.
(click to enlarge)
However, I expect even greater things in 2014.
Dynacor: Why Is It Outperforming?
It is difficult to call Dynacor a gold stock because the company isn't a miner or pure explorer - one part of their business is exploring for gold, while the core of the business is ore processing.
Dynacor owns and operates a successful gold ore processing plant in Peru. The company receives ore from local miners and gets to choose which ore to process, allowing the company to pick the highest grade ore they can find.
Higher gold prices generally lead to higher margins in the ore processing business for Dynacor. However, while lower gold prices means lower margins, the company remains profitable, even at $1,250 gold as we saw in the most recent quarter.
Here are a few reasons why Dynacor is outperforming the market:
#1 Positive Quarterly Results, But Bigger Things to Come
Dynacor reported some pretty impressive results for the last quarter:
- The company announced operating income of $4.6 million and net income of $3.0 million ($.08 a share) for the quarter.
- The company recorded record quarterly gold sales of 20,598 ounces.
- Cash gross operating margin per ounce of gold sold was $285 ($1,320 per ounce selling price), which proves that the business model works in any gold environment. The margin sold in Q3 2012 was $331 per ounce, as higher gold prices leads to a higher margin.
- Cash on hand of $10.3 M at quarter end compared to $3.3 M at December 31, 2012.
(click to enlarge)
Update on New Mill
The company is currently producing around 20,000 of gold per quarter at its ore processing division in Huanca. However, the company is currently constructing a new mill at Chala, Peru, which will have an initial capacity of 300 tpd and be readily expandable to 600 tpd.
The new mill will cost approximately $10 million to construct and it is very likely that the company will fund the remaining construction of the new mill with cash on hand.
This new mill should allow the company to process 25,000 ounces per quarter; with an expansion to 600 tpd, they could be producing as much as 32,500 ounces per quarter. However, the company should also be producing the gold at lower costs due to brand new equipment and a decrease in electricity costs as the company will be connected to the power grid in Chala.
Construction is underway and the only permit that the company still needs is a permit for the actual mill itself. However, the company expects to receive this permit sometime in the next few months and since they have received permits for construction, the building of the new plant is already well underway. The company is still aiming to test the new plant in Q2 2014, with the new plant commissioned and in operation by mid-2014.
An upgrade to 450 TPD will take place shortly after. At 450 TPD, the company expects to produce 25,000 ounces of gold per quarter. With a gross margin of $300 per ounce, which should be attainable even at current gold prices, the company would record cash flow of $5-7 million per quarter; with a plant upgrade to 600 TPD, the profits could be even greater.
Of course, if the price of gold were to go higher, margins would also increase. In 2012, full year margins were $317 an ounce, up from this previous quarter's $280 an ounce. With the new mill's efficiency, margins should be even greater. If Dynacor were to record a gross margin of $350 an ounce and produce more than 100,000 ounces of gold from Chala, the results could be phenomenal.
#2 Non-Dilutive Company
Dynacor prides itself on being a non-dilutive gold company. The company has only 36 million shares outstanding and this share count has remained steady over the years.
Dilution has been a huge problem for many junior gold mining companies in this market. Many junior gold miners developing a project or trying to get into production have had to deal with cost overruns and other issues, with many having to take on debt or issue millions of shares at depressed share prices.
Next, many exploration companies simply have to issue equity to continue exploration. This is simply the nature of their business model.
However, Dynacor does not have this problem as they are self-financed with their profitable ore-processing business. This is a huge plus for shareholders, especially since the company will most likely not have to take on debt or issue equity to finish construction at the new mill.
#3 Big Upside Remains at Tumipampa With Drill Results Coming
Dynacor has a $2.8 million drilling and exploration program underway on its flagship copper and gold exploration property, Tumipampa, located on the Andahualas-Yauri Belt in Peru. This gold belt hosts a number of gold-silver-copper skarn deposits such as Las Bambas, Los Chancas, Constancia, etc.
Tumipampa is surrounded by 6 senior mining companies who have invested over $8 billion in mine development in this region as you'll see below.
(click to enlarge)
Again, this exploration drilling is auto-financed through the company's ore processing division. It is a huge plus that Dynacor does not have to go to the market to issue shares to explore the property.
Some investors might argue that Dynacor should focus solely on their ore processing business. After all, exploration does cost money.
However, the Tumipampa property has the type of home-run potential that can't be ignored by investors and I believe the company is making the right choice by actively exploring the property.
The company reported positive drill results in a Sept. 27 news release:
"During the months of July and August, six (6) holes were drilled HDD7- HDD12. Drill hole HDD8 intercepted the Avelia Ines vein and returned 4.767 g/t Au and 0.2% Cu over 1.1m and drill holes HDD9 and HDD10 revealed close to the surface disseminated gold mineralization with 0.457 g/t Au over 12.4 m and 0.151 g/t Au over 12.2 m."
"This new discovery demonstrates that gold mineralization is very widespread on the Tumipampa property and can be found: (A) associated to polymetallic ores in the skarn, (B) in high grade gold vein structures such as the Manto Dorado, and (C) as low grade disseminated gold in pyritic ore associated to brecciated quartz. As shown by drill holes HDD9 and HDD10 disseminated gold ore is found very close to the surface from depths of 20.0 and 14.8m, respectively."
Meanwhile, underground drilling from within the cross-cut began in August and drill results should be coming in soon. An initial resource estimate is to be expected early 2014. I think that the most likely long-term outcome for Tumipampa is Dynacor finding a partner for the property to get it through to production.
The company could also sell the property completely or try to get it into production itself, and perhaps use its own mill to process the gold.
Dividend Discussion is on the Table
I recently brought up the idea of a dividend to Dale Nejmeldeen, Investor Relations at Dynacor. I argued that this could be a great way to get the shares trading somewhere near a reasonable price. He replied shortly after and said that a dividend will definitely be on the table.
If you do the math, it would not take much money for Dynacor to pay a very decent sized dividend, since the company only has 36 million shares outstanding and is producing robust amounts of cash flow.
For example, in the most recent quarter, Dynacor reported cash flow from operating activities before change in working capital items of $3.5 million, or $14 million on an annual basis. If the company can increase this to $5 million a quarter, which I feel is attainable with the new mill, we are looking at $20 million cash flow annually.
If the company paid out just 30 percent of its cash flow in dividends, it would amount to $6 million in dividends paid for the year. This would amount to dividends paid per share of $.166.
At the current share price of $1.68, this would amount to a dividend yield of 9.9 percent.
Even if the company decided to pay just $2 million per year in dividends or .055 per share, this would still result in a dividend yield of 3.3 percent! At the same time, I believe the company would still have enough money to explore its property at Tumipampa, even under both scenarios.
This is one huge benefit to investing in a non-dilutive, profitable company like Dynacor. I would not be shocked to see Dynacor start paying a small dividend in late 2014 or early 2015 as the company expands its new mill to 600 TPD and actively explores its Tumipampa property.
Bottom Line? My Top Overall Stock Pick for 2014
Dynacor is not only my top gold stock for 2014, but it's my top overall pick. To summarize:
VALUE: Dynacor has a current enterprise value of $48.39 million; meanwhile, the company is generating positive cash flow of $3 million per quarter at their current operations, or $12 million annually. This gives the company an EV/cash flow ratio of just 4.1.
The company also boasts a return on equity of 49 percent, among the highest in the industry. With the new plant online in 2014, profits should only increase. Even if the new plant were to somehow not work out, the company is still running a very profitable operation at Huanca.
LOWER-RISK: Dynacor is one of the lowest-risk microcap stocks I've ever seen. The company has made a name for itself as an honest and reliable business partner in Peru. The company has a very solid balance sheet with very little debt and $10 million in cash, with working capital of $14 million.
KEY CATALYSTS IN 2014: The company has begun construction at its new mill at Chala, which will start at 300 TPD but upgrade to 600 TPD with lower operating costs. Construction is ongoing and the only permit that remains outstanding is the permit for the actual mill. The company says the permit should be coming in very shortly and there is no reason for the delay; the fact that they have begun construction without this final permit tells me that they believe they will receive it without any problem.
Meanwhile, the company's exploration property has a ton of upside potential and can be seen as a "bonus" for investors. I want to emphasis again that the Tumipampa project is surrounded by 6 senior mining companies who have invested over $8 billion in mine development in this region. It should be very interesting to see the upcoming drill results.
However, even without this exploration property which holds big upside in my view, and even without the new mill at Chala, Dynacor is still a solid buy.
The exploration property holds a tremendous amount of upside potential and the company has several options for the property going forward. The company will continue to drill and come out with the first resource estimate; several drill results are pending and should be released to the market shortly.
Dynacor has risen more than 20 percent since my first article but still remains very undervalued. The company has a number of key catalysts coming, which is why I've ranked the stock my top overall pick for 2014.
http://seekingalpha.com/article/1859931-dynacor-my-top-overall-stock-pick-for-2014?source=email_rt_article_readmore
Six powers clinch breakthrough deal curbing Iran's nuclear activity
BY PARISA HAFEZI AND JUSTYNA PAWLAK
GENEVA Sun Nov 24, 2013 6:05am EST
European Union foreign policy chief Catherine Ashton (3rd L) delivers a statement during a ceremony next to British Foreign Secretary William Hague, Germany's Foreign Minister Guido Westerwelle, Iranian Foreign Minister Mohammad Javad Zarif, Chinese Foreign Minister Wang Yi, U.S. Secretary of State John Kerry, Russia's Foreign Minister Sergei Lavrov and French Foreign Minister Laurent Fabius (L-R) at the United Nations in Geneva November 24, 2013. REUTERS-Denis Balibouse
(Reuters) - Iran and six world powers clinched a deal on Sunday curbing the Iranian nuclear program in exchange for initial sanctions relief, signaling the start of a game-changing rapprochement that could ease the risk of a wider Middle East war.
Aimed at ending a long festering standoff, the interim pact between Iran and the United States, France, Germany, Britain, China and Russia won the critical endorsement of Iranian clerical Supreme Leader Ayatollah Ali Khamenei.
U.S. President Barack Obama said the deal struck after marathon, tortuous and politically charged negotiations cut off Tehran's potential path to a nuclear weapon. But Israel, Iran's arch-enemy, denounced the agreement as an "historic mistake".
Halting Iran's most sensitive nuclear work, its higher-grade enrichment of uranium, it was tailored as a package of confidence-building steps towards reducing decades of tension and banish the specter of war over Iran's nuclear aspirations.
European Union foreign policy chief Catherine Ashton, who has been coordinating diplomatic contacts with Iran on behalf of the major powers, said it created time and space for follow-up talks on a comprehensive solution to the dispute.
"This is only a first step," said Iranian Foreign Minister and chief negotiator Mohammad Javad Zarif. "We need to start moving in the direction of restoring confidence, a direction which we have managed to move against in the past."
Hard-pressed by sanctions, many Iranians were elated by the breakthrough and prospect of economic improvement. The Iranian rial currency, decimated earlier this year due to sanctions, jumped more than 3 percent on news of the deal on Sunday.
Obama said that if Iran did not meet its commitments during the six-month period covered by the interim deal, Washington would turn off the tap of sanctions relief and "ratchet up the pressure".
But Israeli Prime Minister Benjamin Netanyahu condemned the deal as it left the nuclear fuel-producing infrastructure of its arch-foe intact. "What was achieved last night in Geneva is not a historic agreement, it was a historic mistake," he said.
"Today the world has become a much more dangerous place because the most dangerous regime in the world took a significant step towards obtaining the world's most dangerous weapon," he said in public remarks to his cabinet.
Nevertheless, the big power foreign ministers appeared relieved and elated after Ashton read out a statement proclaiming the deal in the middle of the night at the United Nations office in Geneva.
Ashton and Kerry U.S. Secretary of State John Kerry hugged each other. Kerry and Russian counterpart Sergei Lavrov shook hands. Minutes later, as Iran's delegation posed for photos, Zarif and French Foreign Minister Laurent Fabius embraced. France had taken the hardest line on Iran in recent talks.
The West has long suspected that Iran has been seeking covertly to develop a nuclear weapons capability. The Islamic Republic, a major oil producer, denies that, saying its nuclear program is a peaceful quest for an alternative source of electricity to serve a rapidly expanding population.
SANCTIONS RELIEF
The United States said the deal halts advances in Iran's nuclear program, including construction of the Arak heavy-water reactor that deeply worries the West as it could yield plutonium, another atomic bomb ingredient, once operational.
It would neutralize Iran's stockpile of uranium refined to a concentration of 20 percent, which is a close step away from the level needed for weapons, and calls for enhanced, more frequent U.N. nuclear inspections, a senior U.S. official said.
A U.S. fact sheet said Iran has also committed to suspending enrichment above a fissile purity of 5 percent - the threshold suitable for running nuclear power stations, which is Iran's stated purpose. Refined uranium also provides the fissile core of an atomic bomb if refined to a high degree.
In return, Iran could obtain access to $1.5 billion in revenue from trade in gold and precious metals and the suspension of some sanctions on its automotive sector, and see its petrochemical exports revive.
But Iranian oil exports would remain for now at their currently significantly reduced levels. "$4.2 billion from these sales will be allowed to be transferred in installments if, and as, Iran fulfils its commitments," a White House fact sheet said.
Much of the sanctions infrastructure, anchored by a Western embargo on Iranian crude oil and a ban on Iranian use of the international banking system, would remain in place pending a final deal aimed at removing all risk of an Iranian atom bomb.
"The approximately $7 billion in relief is a fraction of the costs that Iran will continue to incur during this first phase under the sanctions that will remain in place," the White House document said. "The vast majority of Iran's approximately $100 billion in foreign exchange holdings are inaccessible or restricted."
Relief from sanctions is to begin in two to three weeks, Iran's Mehr news agency quoted Zarif as saying.
The deal does not recognize an Iranian right to enrich uranium, U.S. officials said.
Leaders of the Islamic Republic, nevertheless, welcomed the accord and insisted it did amount to a recognition of what they say is Tehran's right to enrich uranium.
"This can be the basis for further intelligent actions. Without a doubt the grace of God and the prayers of the Iranian nation were a factor in this success," Khamenei, who has the ultimate say on policy in Iran, wrote in a letter to President Hassan Rouhani published by the state news agency IRNA.
Rouhani, a moderate elected by a landslide in June promising "constructive engagement" with the world and relief from sanctions, said the "outcome of these negotiations is that the ... world powers have recognized Iran's nuclear rights".
Rouhani's attempts to repair diplomatic bridges broken by his bellicose predecessor Mahmoud Ahmadinejad and his success in winning the backing of Khamenei reignited negotiations which had dragged on inconclusively, with the two sides talks reciting irreconcilable positions to each other, for 10 years.
"Ultimately, it is the Iranian people and the American people who deserve the most credit. Both are responsible for this initial victory by rejecting defeatists who said that a brighter future was not possible (and) diplomacy could not succeed," said Trita Parsi, president of the National Iranian American Council (NIAC) think-tank.
But many obstacles remain, he cautioned. "Hardliners in both countries will work harder than ever to sabotage this pivot towards a diplomatic path. Those whose only currency is confrontation will search for any opportunities they can find to undermine and sabotage this interim deal."
IRANIANS JOYFUL
For now though, many Iranians were joyful. A post in Farsi by Zarif announcing the deal on his Facebook page received 47,979 "likes" in two hours. There was an outpouring of gratitude and many described him as a "national hero".
"Dear Doctor Zarif ... Your efforts have filled the hearts of the whole nation with happiness," wrote Shayrin Shamshirband.
"I am writing this comment with my eyes filled with tears. Thank you for everything ... After many years, you have returned happiness to the people. You have restored hope in our hearts and pride in my country," commented Mehrnoosh Mohebi.
Kerry said the agreement would make it harder for Iran to make a dash to build a nuclear weapon and would make Israel and other U.S. allies safer.
He also told a late night Geneva news conference that while Obama would not take off the table the possible use of force against Iran, he believed it was necessary first to exhaust diplomacy.
He said the limited sanctions relief could be rescinded.
Kerry and the foreign ministers of the five other powers piled into the negotiations early on Saturday as the two sides appeared to be edging closer to a long-elusive agreement.
France's Fabius said: "After years of blockages, the agreement in Geneva on Iran's nuclear program is an important step to preserving security and peace."
(Additional reporting by Stephanie Nebehay, Fredrik Dahl, John Irish, Arshad Mohammed, Louis Charbonneau in Geneva, Katya Golubkova in Moscow, Isabel Coles and Yara Bayoumy in Dubai and Dan Williams in Jerusalem; Writing by Jon Hemming; Editing by Mark Heinrich)
http://www.reuters.com/article/2013/11/24/us-iran-nuclear-idUSBRE9AI0CV20131124
Thanks for sharing basserdan. Here's a link to a great article;
Who killed JFK? And why did they do it?
Published : November 22nd, 2013
http://www.24hgold.com/english/news-gold-silver-who-killed-jfk-and-why-did-they-do-it-.aspx?article=4703334654G10020&redirect=false&contributor=Food+for+thought
China Is Getting Closer To Pulling The Plug On The Dollar
Nov. 22, 2013
Truthingoldblogspot.com
"...the reason for living was to get ready to stay dead for a long time" - Addie from, "As I Lay Dying by William Faulkner
Many of you are aware by now that China has been methodically eradicating the use of the dollar in its bi-lateral trade with most of its largest trading partners. It has put in place large yuan-based currency swaps which are now used to settle trade with most of Asia and some large western hemisphere countries, including France and the UK. You are also aware of the enormous amount of gold that China has been importing and accumulating (LINK, for example). It's funny how research and investment analysts can find the data to prove this but somehow the World Gold Council and the GFMS seem to be unable to find it.
The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan’s appreciation - LINK
I have been thinking for quite some time - dating back to 2003, to be exact - that China's end game, "check mate" move would be to eventually eliminate the dollar from its trade activities and roll out a new currency that would be backed by gold. At the same time China would implement a huge revaluation of gold in yuan terms in order to establish the necessary market value of its gold hoard to create an effective backing of the new currency. Now, of course, it won't happen exactly like this but in order to envision how a global currency reset will occur we need to think along those lines. However the mechanism is effected, the result will be a massive devaluation of the dollar. This is something that we all know is an inevitable event and that the natural forces of the market would eventually enforce, but something that the U.S. elitists have been deferring by means of insidious political and military-based coercion. And in order for it occur it will likely require that China tosses a straw on the camel's back in order to help the natural market forces override the U.S. repression of them.
There's really no way of determining a time-frame for the actual event so please don't ask me my view of when it will happen. What I will say is that we can observe certain "environmental" signals to let us know whether its sooner or later. Based on the blatant and extreme corruption exhibited by our political and business leaders and based on what I sense is desperation and unrest being reflected by a growing number of dissatisfied middle class people ("middle class" here is defined as anyone who does not have enough liquid wealth to buy their own politician, so 99.9% of us), I suspect that "the event" is a lot closer than most us can possibly discern.
And it looks like the U.S. dollar and the American way of life is getting ready to stay dead for a long time.
POSTED BY DAVE IN DENVER AT 7:53 AM
http://truthingold.blogspot.com/
China Announces That It Is Going To Stop Stockpiling U.S. Dollars
Nov 22 2013, 09:19 | 6 comments
Michael T. Snyder
Money - Photo by Pen Waggener
China just dropped an absolute bombshell, but it was almost entirely ignored by the mainstream media in the United States. The central bank of China has decided that it is "no longer in China’s favor to accumulate foreign-exchange reserves". During the third quarter of 2013, China's foreign-exchange reserves were valued at approximately $3.66 trillion. And of course the biggest chunk of that was made up of U.S. dollars. For years, China has been accumulating dollars and working hard to keep the value of the dollar up and the value of the yuan down. One of the goals has been to make Chinese products less expensive in the international marketplace. But now China has announced that the time has come for it to stop stockpiling U.S. dollars. And if that does indeed turn out to be the case, than many U.S. analysts are suggesting that China could also soon stop buying any more U.S. debt. Needless to say, all of this would be very bad for the United States.
For years, China has been systematically propping up the value of the U.S. dollar and keeping the value of the yuan artificially low. This has resulted in a massive flood of super cheap products from across the Pacific that U.S. consumers have been eagerly gobbling up.
For example, have you ever gone into a dollar store and wondered how anyone could possibly make a profit by making those products and selling them for just one dollar?
Well, the truth is that when you flip those products over you will find that almost all of them have been made outside of the United States. In fact, the words "made in China" are probably the most common words in your entire household if you are anything like the typical American.
Thanks to the massively unbalanced trade that we have had with China, tens of thousands of our businesses, millions of our jobs and trillions of our dollars have left this country and gone over to China.
And now China has apparently decided that there is not much gutting of our economy left to do and that it is time to let the dollar collapse. As I mentioned above, China has announced that it is going to stop stockpiling foreign-exchange reserves ...
The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan’s appreciation.
“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting. Neither Yi nor Zhou gave a timeframe for any changes.
It isn't going to happen overnight, but the value of the U.S. dollar is going to start to go down, and all of that cheap stuff that you are used to buying at Wal-Mart and the dollar store is going to become a lot more expensive.
But of even more importance is what this latest move by China could mean for U.S. government debt. As most Americans have heard, we are heavily dependent on foreign nations such as China lending us money. Right now, China owns nearly 1.3 trillion dollars of our debt. Unfortunately, as CNBC is noting, if China is going to quit stockpiling our dollars than it is likely that they will stop stockpiling our debt as well ...
Analysts see this as the PBoC hinting that it will let its currency fluctuate, without intervention, thus negating the need for holding large reserves of the dollar. And if the dollar is no longer needed, then it could look to curb its purchases of dollar-denominated assets like U.S. Treasurys.
"If they are looking to reduce these purchases going forward then, yes, you'd have to look at who the marginal buyer would be," Richard McGuire, a senior rate strategist at Rabobank told CNBC in an interview.
"Together, with the Federal Reserve tapering its bond purchases, it has the potential to add to the bearish long-term outlook on U.S. Treasurys."
So who is going to buy all of our debt? That is a very good question. If the Federal Reserve starts tapering bond purchases and China quits buying our debt, who is going to fill the void?
If there is significantly less demand for government bonds, that will cause interest rates to rise dramatically. And if interest rates rise dramatically from where they are now, that will set off the kind of nightmare scenario that I keep talking about.
In a previous article entitled "How China Can Cause The Death Of The Dollar And The Entire U.S. Financial System", I described how China could singlehandedly cause immense devastation to the U.S. economy.
China accounts for more global trade that anyone else does, and they also own more of our debt than any other nation does. If China starts dumping our dollars and our debt, much of the rest of the planet would likely follow suit and we would be in for a world of hurt.
And just this week there was another major announcement which indicates that China is getting ready to make a major move against the U.S. dollar. According to Reuters, crude oil futures may soon be priced in yuan on the Shanghai Futures Exchange ...
The Shanghai Futures Exchange (SHFE) may price its crude oil futures contract in yuan and use medium sour crude as its benchmark, its chairman said on Thursday, adding that the bourse is speeding up preparatory work to secure regulatory approvals.
China, which overtook the United States as the world's top oil importer in September, hopes the contract will become a benchmark in Asia and has said it would allow foreign investors to trade in the contract without setting up a local subsidiary.
If that actually happens, that will be absolutely huge.
China is the number one importer of oil in the world, and it was only a matter of time before they started to openly challenge the petrodollar.
But even I didn't think that we would see anything like this so quickly.
The world is changing, and most Americans have absolutely no idea what this is going to mean for them. As demand for the U.S. dollar and U.S. debt goes down, the things that we buy at the store will cost a lot more, our standard of living will go down and it will become a lot more expensive for everyone (including the U.S. government) to borrow money.
Unfortunately, there isn't much that can be done about any of this at this point. When it comes to economics, China has been playing chess while the United States has been playing checkers. And now decades of very, very foolish decisions are starting to catch up with us.
The false prosperity that most Americans are enjoying today will soon start disappearing, and most of them will have no idea why it is happening.
The years ahead are going to be very challenging, and so I hope that you are getting ready for them.
http://seekingalpha.com/article/1857411-china-announces-that-it-is-going-to-stop-stockpiling-u-s-dollars
China Announces That It Is Going To Stop Stockpiling U.S. Dollars
Nov 22 2013, 09:19 | 6 comments
Michael T. Snyder
Money - Photo by Pen Waggener
China just dropped an absolute bombshell, but it was almost entirely ignored by the mainstream media in the United States. The central bank of China has decided that it is "no longer in China’s favor to accumulate foreign-exchange reserves". During the third quarter of 2013, China's foreign-exchange reserves were valued at approximately $3.66 trillion. And of course the biggest chunk of that was made up of U.S. dollars. For years, China has been accumulating dollars and working hard to keep the value of the dollar up and the value of the yuan down. One of the goals has been to make Chinese products less expensive in the international marketplace. But now China has announced that the time has come for it to stop stockpiling U.S. dollars. And if that does indeed turn out to be the case, than many U.S. analysts are suggesting that China could also soon stop buying any more U.S. debt. Needless to say, all of this would be very bad for the United States.
For years, China has been systematically propping up the value of the U.S. dollar and keeping the value of the yuan artificially low. This has resulted in a massive flood of super cheap products from across the Pacific that U.S. consumers have been eagerly gobbling up.
For example, have you ever gone into a dollar store and wondered how anyone could possibly make a profit by making those products and selling them for just one dollar?
Well, the truth is that when you flip those products over you will find that almost all of them have been made outside of the United States. In fact, the words "made in China" are probably the most common words in your entire household if you are anything like the typical American.
Thanks to the massively unbalanced trade that we have had with China, tens of thousands of our businesses, millions of our jobs and trillions of our dollars have left this country and gone over to China.
And now China has apparently decided that there is not much gutting of our economy left to do and that it is time to let the dollar collapse. As I mentioned above, China has announced that it is going to stop stockpiling foreign-exchange reserves ...
The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan’s appreciation.
“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting. Neither Yi nor Zhou gave a timeframe for any changes.
It isn't going to happen overnight, but the value of the U.S. dollar is going to start to go down, and all of that cheap stuff that you are used to buying at Wal-Mart and the dollar store is going to become a lot more expensive.
But of even more importance is what this latest move by China could mean for U.S. government debt. As most Americans have heard, we are heavily dependent on foreign nations such as China lending us money. Right now, China owns nearly 1.3 trillion dollars of our debt. Unfortunately, as CNBC is noting, if China is going to quit stockpiling our dollars than it is likely that they will stop stockpiling our debt as well ...
Analysts see this as the PBoC hinting that it will let its currency fluctuate, without intervention, thus negating the need for holding large reserves of the dollar. And if the dollar is no longer needed, then it could look to curb its purchases of dollar-denominated assets like U.S. Treasurys.
"If they are looking to reduce these purchases going forward then, yes, you'd have to look at who the marginal buyer would be," Richard McGuire, a senior rate strategist at Rabobank told CNBC in an interview.
"Together, with the Federal Reserve tapering its bond purchases, it has the potential to add to the bearish long-term outlook on U.S. Treasurys."
So who is going to buy all of our debt? That is a very good question. If the Federal Reserve starts tapering bond purchases and China quits buying our debt, who is going to fill the void?
If there is significantly less demand for government bonds, that will cause interest rates to rise dramatically. And if interest rates rise dramatically from where they are now, that will set off the kind of nightmare scenario that I keep talking about.
In a previous article entitled "How China Can Cause The Death Of The Dollar And The Entire U.S. Financial System", I described how China could singlehandedly cause immense devastation to the U.S. economy.
China accounts for more global trade that anyone else does, and they also own more of our debt than any other nation does. If China starts dumping our dollars and our debt, much of the rest of the planet would likely follow suit and we would be in for a world of hurt.
And just this week there was another major announcement which indicates that China is getting ready to make a major move against the U.S. dollar. According to Reuters, crude oil futures may soon be priced in yuan on the Shanghai Futures Exchange ...
The Shanghai Futures Exchange (SHFE) may price its crude oil futures contract in yuan and use medium sour crude as its benchmark, its chairman said on Thursday, adding that the bourse is speeding up preparatory work to secure regulatory approvals.
China, which overtook the United States as the world's top oil importer in September, hopes the contract will become a benchmark in Asia and has said it would allow foreign investors to trade in the contract without setting up a local subsidiary.
If that actually happens, that will be absolutely huge.
China is the number one importer of oil in the world, and it was only a matter of time before they started to openly challenge the petrodollar.
But even I didn't think that we would see anything like this so quickly.
The world is changing, and most Americans have absolutely no idea what this is going to mean for them. As demand for the U.S. dollar and U.S. debt goes down, the things that we buy at the store will cost a lot more, our standard of living will go down and it will become a lot more expensive for everyone (including the U.S. government) to borrow money.
Unfortunately, there isn't much that can be done about any of this at this point. When it comes to economics, China has been playing chess while the United States has been playing checkers. And now decades of very, very foolish decisions are starting to catch up with us.
The false prosperity that most Americans are enjoying today will soon start disappearing, and most of them will have no idea why it is happening.
The years ahead are going to be very challenging, and so I hope that you are getting ready for them.
http://seekingalpha.com/article/1857411-china-announces-that-it-is-going-to-stop-stockpiling-u-s-dollars
RRI – Riverside Resources is Being Proactive, Even in This Market
POSTED ON NOVEMBER 21, 2013
BY TRAVIS MCPHERSON
CEO.CA
RRI's team is heavily focused in Mexico as well as Arizona and BC
Dr. John-Mark Staude’s Riverside Resource (RRI:TSXV), the prospect generator with precious and base metal assets across some of North America’s most prolific mineral belts, announced initial exploration results from their Flute and Lennac projects in BC. The projects were identified as part of a three year alliance with Antofagasta, the Chilean copper giant, which ends in 2014 and saw Antofagasta invest $1.8 million in exploration. RRI recently inked a new $1.8 million deal with Antofagasta to explore for large copper porphyries in northwestern Mexico. They have a similar deal in Mexico with Hochschild Mining PLC for $2.25 million in exploration work for gold prospects in Sonora.
During this past year exploring on the Flute and Lennac projects, the companies completed reverse-circulation (RC) drilling, Ah-horizon soil sampling, induced polarization geophysical surveying, geological mapping and rock sampling and now believe they have identified solid drill ready targets for a potential 2014 drill campaign. RRI has generated new anomalous copper-gold targets with three new porphyry-style intrusive centres discovered. They are particularly interested in the new massive sulphide zone.
In broadly spaced sampling the company identified a 1.2km copper-in-soil anomaly over 120 parts per million copper at the Red Top target and remains open in three directions. The highlight from Red Top returned 0.19% copper and 70ppb gold.
Riverside's President/CEO John-Mark Staude
Riverside’s President and CEO, John-Mark Staude, commented: “The second year of exploration work at Flute and Lennac outlined more copper-gold and found the massive sulphide zone. Through the encouraging results from soils and RC drill holes, we are pleased to look toward spring 2014 to work with Antofagasta to now drill test these with core drilling to get into the heart of the systems. We look forward to further work and results in B.C., with the alliance now having three strong projects with the recently announced agreement for the Swift Katie copper project.”
The newly identified massive sulphide zone identified on the Flute project is adjacent to large magnetic feature which sits at the junction of a regional north-south and north-west trending faults. As a geologist friend of mine informed me last night: “good things happen at the intersections.”
Riverside has been active this fall, taking advantage of the current markets; picking up prospective projects and adding them to their substantial database of highly prospective, earlier-stage, prospects. On November 1st the company announced they, along with their alliance partner Antofagasta, would option to earn-in 80% of the Swift Katie copper project in BC from Valterra Resources. For this RRI and Antofagasta will commit to $5 million in exploration expenditures over four years. The project has had previous work done, almost 20,000m (70 holes) of drilling, which has identified 1.9km of strike length with 900m of width and 600m depth that remains open in most directions.
“We are excited by the exploration upside at the already established Swift Katie porphyry copper project,” states John-Mark.
La Herradura mine in Sonora hosts 7Moz and is operated by Fresnillo/Newmont
Then, a few days later, RRI announced they would be acquiring three new gold projects in the Sonora Megashear Gold Belt from Argonaut Gold (AR:TSX). John-Mark is most excited about the Bohemia project which is located 15km from the past producing La Choya mine (which Penoles is putting back into production) and the 7 million ounce La Herradura gold mine. Bohemia is comprised of high-grade gold found in veins, stockwork and wall rocks. RRI and its alliance partner, Hochschild, were able to pick these projects up on the cheap, only having to dish out $40,000 in cash and a 1% NSR of which half can be bought back for $500,000 at any time.
The Bohemia project looks amenable to a typical Mexican low cost, open-pit, heap leach gold mine, which remains a favorite of the majors given the low capital intensity and operating costs to produce gold at these types of projects. Ultimately, that is their model. They pick up projects on the cheap, option them out and let other companies spend money and earn into them. Then they either get the project back with more money spent on them, or they build a mine with their partner (usually predominately funded by the other party).
Riverside is tightly held, with over 30% of the outstanding shares being held by smart money as well as management. Shareholders include resource investing legends: Sprott Asset Management and Rick Rule as well as mining royalty such as Kinross Gold and Cliffs Natural Resources.
They have $5.5 million in cash with a minimal burn rate given they spend other companies’ money on exploration costs which, in this environment, should be attractive to any and all resource investors. The company is getting a combined $4 million in exploration work being done on a portfolio of projects over the next three years. RRI is moving their alliance partnership assets forward as well as moving their Sugarloaf and Penoles projects toward initial resource estimates.
Unlike most of its peers, Riverside is doing significant work on their early-stage projects which provides consistent news flow. They have five projects currently under joint venture and another nine which they are looking to option out. They are constantly evaluating new projects so acquisitions are always a possibility for these guys.
RRI has a market capitalization of $12.5 million, they have $5.5 million in cash and are expected to get a total of $6.5 million spent on their assets over 2013.
As Brent Cook of Exploration Insights put it: “although less exciting than a throw of the dice, the prospect generator model offers an intelligent and relatively lower risk alternative for speculating in the junior exploration market.”
Their corporate video gives a good 90 second overview:
The Money Changers Serenade: A New Bankers’ Plot to Steal Your Deposits
By Dr. Paul Craig Roberts
Global Research, November 22, 2013
Former Treasury Secretary Timothy Geithner, a protege of Treasury Secretaries Rubin and Summers, has received his reward for continuing the Rubin-Summers-Paulson policy of supporting the “banks too big to fail” at the expense of the economy and American people. For his service to the handful of gigantic banks, whose existence attests to the fact that the Anti-Trust Act is a dead-letter law, Geithner has been appointed president and managing director of the private equity firm, Warburg Pincus and is on his way to his fortune. A Warburg in-law financed Woodrow Wilson’s presidential campaign. Part of the reward was Wilson’s appointment of Paul Warburg to the first Federal Reserve Board. The symbiotic relationship between presidents and bankers has continued ever since. The same small clique continues to wield financial power.Geithner’s career is illustrative. In the 1980s, Geithner worked for Kissinger Associates. In the mid to late 1990s, Geithner served as a deputy assistant Treasury secretary. Under Rubin and Summers he moved up to undersecretary of the Treasury.From the Treasury he went to the Council on Foreign Relations and from there to the International Monetary Fund (IMF). From there he was appointed president of the Federal Reserve Bank of New York, where he worked to make banks more profitable by allowing higher ratios of debt to capital, thus contributing to the financial crisis.
Geithner arranged the sale of the failed Wall Street firm of Bear Stearns, helped with the taxpayer bailout of AIG, and rejected saving Lehman Brothers from bankruptcy in order to create the crisis atmosphere needed to more fully subordinate US economic policy to the needs of the few large banks.
Rubin, a 26-year veteran of Goldman Sachs, was rewarded by Citibank for his service to the banks while Treasury Secretary with a $50 million compensation package in 2008 and $126,000,000 between 1999 and 2009.
When a person becomes a Treasury official it is made clear that the choice is between serving the banks and becoming rich or trying to serve the public and becoming poor. Few make the latter choice.
As MIchael Hudson has informed us, the goal of the financial sector has always been to convert all income, from corporate profits to government tax revenues, to the service of debt. From the bankers standpoint, the more debt the richer the bankers. Rubin, Summers, Paulson, Geithner, and now banker Treasury Secretary Jack Lew faithfully serve this goal.
The Federal Reserve describes its policy of Quantitative Easing — the creation of new money with which the Fed purchases Treasury debt and mortgage backed securities — as a low interest rate policy in order to stimulate employment and economic growth. Economists and the financial media have parroted this cover story.
In contrast, I have exposed QE as a scheme for pumping profits into the banks and boosting their balance sheets. The real purpose of QE is to drive up the prices of the debt-related derivatives on the banks’ books, thus keeping the banks with solvent balance sheets.
Writing in the Wall Street Journal (“Confessions of a Quantitative Easer,” November 11, 2013), Andrew Huszar confirms my explanation to be the correct one. Huszar is the Federal Reserve official who implemented the policy of QE. He resigned when he realized that the real purposes of QE was to drive up the prices of the banks’ holdings of debt instruments, to provide the banks with trillions of dollars at zero cost with which to lend and speculate, and to provide the banks with “fat commissions from brokering most of the Fed’s QE transactions.” (See: www.paulcraigroberts.org)
This vast con game remains unrecognized by Congress and the public. At the IMF Research Conference on November 8, 2013, former Treasury Secretary Larry Summers presented a plan to expand the con game.
Summers says that it is not enough merely to give the banks interest free money. More should be done for the banks. Instead of being paid interest on their bank deposits, people should be penalized for keeping their money in banks instead of spending it.
To sell this new rip-off scheme, Summers has conjured up an explanation based on the crude and discredited Keynesianism of the 1940s that explained the Great Depression as a problem caused by too much savings. Instead of spending their money, people hoarded it, thus causing aggregate demand and employment to fall.
Summers says that today the problem of too much saving has reappeared. The centerpiece of his argument is “the natural interest rate,” defined as the interest rate at which full employment is established by the equality of saving with investment. If people save more than investors invest, the saved money will not find its way back into the economy, and output and employment will fall.
Summers notes that despite a zero real rate of interest, there is still substantial unemployment. In other words, not even a zero rate of interest can reduce saving to the level of investment, thus frustrating a full employment recovery. Summers concludes that the natural rate of interest has become negative and is stuck below zero.
How to fix this? The way to fix it, Summers says, is to charge people for saving money. To avoid the charges, people would spend the money, thus reducing savings to the level of investment and restoring full employment.
Summers acknowledges that the problem with his solution is that people would take their money out of banks and hoard it in cash holdings. In other words, the cash form of money provides consumers with a freedom to save that holds down consumption and prevents full employment.
Summers has a fix for this: eliminate the freedom by imposing a cashless society where the only money is electronic. As electronic money cannot be hoarded except in bank deposits, penalties can be imposed that force unproductive savings into consumption.
Summers’ scheme, of course, is a harebrained one. With governments running huge deficits, who would purchase bonds at negative interest rates? How would pension and retirement funds operate? Would they also be subject to an annual percentage confiscation?
We know that the response of consumers to the long term decline in real median family income, to the loss of jobs from labor arbitrage across national borders (jobs offshoring), to rising homelessness, to cuts in the social safety net, to the transformation of their full time jobs to part time jobs (employers’ response to Obamacare), has been to reduce their savings rate. Indeed, few have any savings at all. The US personal saving rate is currently 2 percentage points, about 30%, below the long term average. Retired people, unable to earn any interest on their savings from the Fed’s zero interest rate policy, are being forced to draw down their savings in order to pay their bills.
Moreover, it is unclear whether the savings rate is an accurate measure or merely a residual of other calculations. With so many people having to draw down their savings, I wouldn’t be surprised if an accurate measure showed the personal savings rate to be negative.
But for Summers, the plight of the consumer is not the problem. The problem is the profits of the banks. Summers has the solution, and the establishment, including Paul Krugman, is applauding it. Once the economy officially turns down again, watch out.
http://www.globalresearch.ca/the-money-changers-serenade-a-new-bankers-plot-to-steal-your-deposits/5359018
TD Securities Commodity Chart Logic
Nov. 21, 2013
https://www.tdsresearch.com/currency-rates/viewEmailFile.action?eKey=HEU3JG1I0PG6BS8O7XW9I8RIP
China to Start Gold Swaps Trading to Further Liberalize Market
By Bloomberg News - Nov 22, 2013
China, on track to overtake India as the world’s largest gold consumer this year, will start interbank swaps trading next week in a move to further open up the domestic precious metals market.
Trading will start Nov. 25 on the Shanghai-based China Foreign Exchange Trade System, according to a statement by the National Interbank Funding Center today. The Shanghai Gold Exchange, the country’s biggest spot gold bourse, will handle related settlement and delivery, said the statement.
“Swaps will be one more tool for banks to manage risks associated with bullion trading and will help broaden China’s gold market,” said Song Qing, fund manager at Lion Fund Management Co., China’s first asset manager to place money in foreign exchange-traded gold funds.
Bullion consumption in the world’s second-largest economy will surge 29 percent this year to a record 1,000 metric tons, according to the median of 13 estimates from analysts, traders and gold producers in China surveyed by Bloomberg News.
Bullion of 99.99 percent purity on the Shanghai Gold Exchange dropped 0.3 percent to trade at 245.66 yuan ($1,254.03 an ounce) at 2:30 p.m. local time. Gold for immediate delivery was at $1,245.82 an ounce.
To contact Bloomberg News staff for this story: Feiwen Rong in Beijing at frong2@bloomberg.net
To contact the editor responsible for this story: Jarrett Banks at jbanks15@bloomberg.net
http://www.bloomberg.com/news/2013-11-22/china-to-start-gold-swaps-trading-to-further-liberalize-market.html?
Can New Jersey Become the Online Gambling Capital of the World?
By Joshua Brustein
November 22, 2013
Businessweek
Just days before New Jersey’s experiment with online gambling goes live, the lawmaker responsible for pushing the issue in the first place is setting his sights on global gamblers.
State Senator Raymond Lesniak plans to introduce a bill that would let international companies set up shop in New Jersey and then offer online gambling to people located outside the U.S. The idea is to play on America’s reputation for financial security: Legal gambling operations headquartered in New Jersey would presumably appear less likely to make off with customers’ money or crumble under shifting regulations.
Lest he might fail to establish that he plans to make New Jersey’s laws as friendly to gambling companies as possible, Lesniak told reporters via a conference call on Thursday: “I didn’t come up with this proposal. Some of the gaming companies did because they want to come here.”
New Jersey’s interest in online gambling was never just about allowing its 9 million residents to play digital poker against one another. Once the infrastructure is set up, New Jersey believes it can serve as a beachhead for a much wider market. Between the local and international licenses available under the online gambling law, New Jersey will create 16,000 to 22,000 jobs, according to a study done for Lesniak by Econsult Solutions.
Lesniak’s bill would also allow international companies with a physical presence in the state to take bets on sports from people in other countries—even though gambling is currently illegal in New Jersey itself. The lawmaker expects the bill to be passed next spring. Some unsettled issues remain, though.
For one thing, it’s not clear that foreign companies will find New Jersey as attractive as Lesniak imagines, given questions about taxation and memories of recent American hostility to online gambling. Nor is it a foregone conclusion that other countries will smile on U.S.-based companies taking bets from their residents. Regulators from New Jersey would have to reach agreements with regulators in gamblers’ home countries. And legal gambling industries are already established in many major markets. Some within the industry believe that providing infrastructure to other American states as they liberalize online gambling laws is a better area of focus for New Jersey.
Lesniak may be getting a bit ahead of himself, given that no one is certain how well New Jersey’s online gambling experiment will play out. As we’ve seen recently, the success of ambitious, government-supported Internet ventures is hardly guaranteed.
The state legislative, meanwhile, is still scuffling over what types of gambling should be legal in New Jersey. Lesniak’s inclusion of sports gambling seems to be almost wholly intended as a thumb of the nose toward the federal government and the major sports leagues that are suing New Jersey over its attempt to legalize sports betting. And the Washington Post reported over the weekend that Sheldon Adelson, chairman and chief executive officer of Las Vegas Sands (LVS), who makes his money running brick-and-mortar casinos, is planning a major push to get the federal government to outlaw online gambling next year.
Adelson has not followed rival physical casino businesses into the online market, so it seems he has the most to lose from the rise of Internet gaming. He insists that his objection is purely moral. In a strange interview with Bloomberg TV over the summer, he tried to explain the distinction between upstanding, in-person gambling and the “cancer” that is the online version. Adelson’s argument is worth listening to in its entirety, but basically he puts forth a scenario in which people will be drunk and naked, lying in bed with computers, unable to resist the peer pressure to play online poker. “No land-based casinos, whether it’s us or Harrah’s or now Caesars (CZR), would allow somebody who’s out of control with themselves to sit and gamble,” he says.
In the conference call, Lesniak expressed annoyance with Adelson and scoffed at another line of argument the billionaire has made: the suggestion that online gambling would have a particularly pernicious impact on poor people. “If he was really concerned about those folks,” Lesniak said, “he’d go after the lottery.”
Brustein is a writer for Businessweek.com in New York
http://www.businessweek.com/articles/2013-11-22/can-new-jersey-become-the-online-gambling-capital-of-the-world
People's Bank of China Stops Supporting U.S. Debt
Katchum's Macro-Economic Blog
Nov. 21, 2013
One of the more interesting stories this week has been reported by Bloomberg. The People's Bank of China is said to stop increasing its foreign currency reserves. What implications will this have? I believe that we'll see the start of a U.S. dollar collapse.
Chart 1: PBOC Balance Sheet[/img]
All these years, the Chinese bank had increased their balance sheet up to $3.66 trillion of which $1.3 trillion are U.S. treasuries (Chart 1). This is almost half of the PBOC's balance sheet. Other assets include U.S. agencies, U.S. corporate debt, U.S. equities and other non-U.S. assets (Chart 2).
Chart 2: PBOC's U.S. Asset Composition[/img]
If the PBOC is going to stop the purchases of foreign currency reserves, this means that they will stop buying the assets above and mainly stop buying U.S. treasuries. That's what it all comes down to. This also means that their excess of U.S. dollars will need to be converted to other assets like the yuan, or even gold. In fact, one of the ideas of China is to prepare the yuan as a reserve currency and I believe this is a first step in that direction. We know that China has amassed a lot of gold, when considering the amount of gold imports from Hong Kong. I believe the PBOC should have added significantly to its gold positions since 2009. The PBOC hasn't reported their gold holdings since 2009 but it is said that they own around 4000 tonnes of gold right now. Needless to say this will be very bullish for the yuan going forward. If we take a look at the chart of the USD/CNY exchange rate we see that the yuan has already increased a lot. I believe the yuan will continue its ascent. To bank on this trend, investors can buy the WisdomTree Dreyfus Chinese Yuan Fd ETF (CYB).
Chart 3: USD/CNY
People are still wondering: "If the Chinese stop supporting the U.S. treasuries, why has the U.S. dollar strengthened so much?". Well, reality is that the Chinese have bought many treasuries in the past (Chart 4), but are only now showing their plans to start the unwinding process.
Chart 4: China U.S. Treasury Holdings
We can already see this "unwinding" in the U.S. bond market as U.S. treasury yields are starting to move up (Chart 5).
Chart 5: U.S. Treasury Yields
As you know, the Chinese own mostly longer dated U.S. treasuries. They will do everything to shorten their maturity and sell the longer dated treasuries. The reason why they do this is that shorter maturities have less price risk. Longer maturities are more volatile and the losses would be greater during a U.S. bond market collapse. While this conversion happens, the U.S. government is eagerly buying up these longer dated treasuries and helping the Chinese to unload. I can't blame the Chinese for doing this. If you look how the Western central banks are increasing their balance sheets (Chart 6) and increasing their debt piles, U.S. treasuries are not a good investment going forward. I believe Quantitative Easing (QE) is never going to end because the unemployment picture is very bad at the moment. We hear from the New York Post that the unemployment rate numbers have been falsified by the U.S. government, so that's even more incentive to have QE to infinity.
Chart 6: Central Bank Balance Sheet Expansion
I believe the Chinese will diversify from their U.S. treasury holdings soon and will buy other depreciated assets. One of these depreciated assets is of course gold (GLD) and silver (SLV). With these assets going under the cost of production right now, there is no reason not to buy these. The inflationary prospects are going to start arising in the near future because there are many signs appearing. First off, we see that art prices, real estate and equities have rising considerably. When all of these capital goods start flowing their earnings into the consumer market, we will start to see consumer inflation. Second, we have seen the capacity utilization rate for the U.S. total industry rise to new highs, this is a sign that inflation is about to arise in the coming years. Third, we see that the average hourly earnings have bottomed out and this will translate into a higher price structure in the economy. And finally, the money supply has continued to rise and eventually all of this extra money will have inflationary effects.
Geplaatst door Albert Sung op 18:53
http://katchum.blogspot.com/2013/11/peoples-bank-of-china-stops-supporting.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+KatchumsMacro-economicBlog+%28Katchum%27s+Macro-Economic+Blog%29
Fed Minutes Reveal a Dangerous Power Grab by New York Fed
By Pam Martens: November 21, 2013
Simon Potter, Markets Group Head at the New York Fed
Just when it seemed one could no longer be shocked by the corruption, hubris and lack of accountability in the American financial system, along comes yesterday’s release of the Federal Reserve’s minutes for the October 29-30 meeting of its Federal Open Market Committee (FOMC).
While mainstream media focuses on what the minutes revealed about when the Fed might begin to reduce its monthly $85 billion in bond purchases, receiving scant attention is a brazen power grab boldly stated on page two of the eleven pages of minutes.
Back on October 31, wire services reported that the temporary dollar and foreign currency swap lines that had been put in place between central banks on a temporary basis during the financial crisis had been turned into standing arrangements.
The Associated Press explained the action as follows: “Six of the world’s leading central banks, including the U.S. Federal Reserve, say they will provide each other with ready supplies of their currencies on a standing basis, extending arrangements set up to steady the global financial system during post-2007 turbulence.”
In other words, without public deliberations, an action that was adopted as a temporary, emergency operation, now had become a permanent part of world finance – on the basis of minutes and details yet to be seen by Congress or the general public.
When those minutes were released yesterday, alarm bells should have rang out from the business press. Not only did this temporary emergency measure become permanent, but the full FOMC committee is reduced to voting on its continuance but once a year and the conduct of the program has been effectively delegated to the Chairman of the Federal Reserve and a man the American people have never heard of, Simon Potter, the Manager of the System Open Market Account and Markets Group at the Federal Reserve Bank of New York.
According to the minutes, ten members of the FOMC Committee, including Federal Reserve Chairman Ben Bernanke and his likely replacement, Vice Chairman, Janet Yellen, unanimously voted in favor of the plan. The comments of those opposing the plan are opaquely described in the minutes as follows: “The Committee considered a proposal to convert the existing temporary central bank liquidity swap arrangements to standing arrangements with no preset expiration dates. The Manager [Potter] described the proposed arrangements, noting that the Committee would still be asked to review participation in the arrangements annually. A couple of participants expressed reservations about the proposal, citing opposition to swap lines with foreign central banks in general or questioning the governance implications of these standing arrangements in particular.”
Instead of the full FOMC committee, which includes Federal Reserve Board Commissioners and Presidents of the regional Federal Reserve banks, approving these interventions in foreign currencies, the Chairman of the Federal Reserve will simply now consult with a subcommittee. But more troubling, the New York Fed has gained enormous power in the process. The minutes state: “authority to approve subsequent drawings of a more routine character for either the dollar or foreign currency liquidity swap lines may be delegated to the Manager [Potter], in consultation with the Chairman.”
Simon Potter already wields enormous and nontransparent power in financial markets. Potter is head of the Markets Group which oversees a sprawling trading operation at the New York Fed. Of the 12 regional Federal Reserve Banks, only the New York Fed has a trading floor rivaling that of Goldman Sachs. Potter is also Manager of the System Open Market Account (SOMA) at the New York Fed. According to the Fed’s web site, SOMA operations are designed to influence bank reserves, money market conditions, and monetary aggregates.
The New York Fed has come under withering criticism for allowing CEOs of the serially prosecuted Wall Street banks to serve on its Board of Directors while it purports to function as a primary regulator of Wall Street. Despite having failed to detect and prevent the frauds that led to the financial collapse of Wall Street in 2008, it has received expanded regulatory powers under the Dodd-Frank “reform” legislation.
On July 16 of last year, the former New York State Attorney General and later Governor who attempted to drag Wall Street corruption into the light of day before it imploded the system, Eliot Spitzer, penned an article for Slate on the insidious doings of the New York Fed.
Under the headline, “Why the New York Fed Must Be Investigated,” Spitzer explained the history of the New York Fed’s role in turning a blind eye to the rigging of the global interest rate benchmark known as Libor, a benchmark impacting everything from student loans to mortgage rates to municipal borrowing costs across America. Spitzer wrote: “The New York Federal Reserve knew about Libor games being played by the banks years ago and seems to have done precious little about it—except perhaps send a memo parroting the so-called reform ideas proposed by the banks themselves. Then nothing more. No prosecutions, no inquiries of the banks to see if the illegal behavior had stopped—just a live-and-let-live attitude.”
Spitzer called for an independent special prosecutor to investigate the New York Fed, citing the deep conflicts of interests on its Board over the years:
“Well, look who was on the board: Dick Fuld of Lehman fame; Sandy Weill of Citibank; Jeff Immelt of GE—the largest beneficiary of the Fed’s commercial paper guarantees; and, of course, Jamie Dimon of JPMorgan Chase, whose bank’s London derivative trades and Libor involvement make his role on the board even more absurd.”
Dimon’s two-terms totaling six years on the Board of the New York Fed ended this past December. He continued to serve even as his bank, JPMorgan Chase, was being investigated for losing $6.2 billion trading exotic derivatives with its bank depositors’ money.
And the hits just keep on coming. Last month we learned that Carmen Segarra, a former bank examiner at the New York Fed is charging in a lawsuit that she was told to change her negative review of Goldman Sachs over its inadequate conflict of interest policy. When she refused to do so, she was terminated in retaliation and escorted from the Fed premises, according to her lawsuit.
Just how long will it take Congress — that body in Washington with a 9 percent approval rating from the American people — to figure out that “just trust us” has been a killer policy when it comes to Wall Street and other people’s money.
http://wallstreetonparade.com/2013/11/fed-minutes-reveal-a-dangerous-power-grab-by-new-york-fed/
Is Venezuela Selling Gold to Goldman Sachs?
Posted on November 20, 2013
libertyblitzkrieg.com
The following article was published in the Venezuelan newspaper El Nacional, and it appears to imply that the struggling South American nation has agreed to sell or swap the gold it still holds overseas at the Bank of England to Goldman Sachs.
This is one of the major problems with gold. Despite what some may say, it is probably the most manipulated asset on the planet. Given the fact that so much of the gold is in the hands of sovereign nations and Central Banks that can be pressured by the U.S. empire, this is what happens. In fact, as I have said on many occasions, many of the Central Bank purchases we hear about do not consist of countries actually moving gold to within their borders, but rather just paper purchases. This does nothing to tighten supply/demand for gold. The main countries who’s Central Banks actually appear to buy and deliver gold within their borders are China, Russia, Iran, and well, Venezuela. Until that changes, gold will be relatively easily manipulated, which is exactly why I support Bitcoin and why is taking off as it has.
From a sentiment perspective I think gold is buy, but personally I am waiting to see if we get one more major flush.
Here are excepts from the article courtesy of GATA. I believe it is a google translation and the actual sourced article in Spanish can be found here.
Venezuela’s Central Bank and Goldman Sachs are ready to sign an agreement to swap or exchange international gold reserves, with a start date in October, as stated in the contract, and until October 2020.
The negotiated amount, equivalent to 1.45 million ounces of gold, are deposited in the Bank of England and the transfers are made directly to Goldman Sachs once delivery times are stipulated.
The operation involves the delivery of gold from the central bank, which will receive dollars from the U.S. firm. The transactions are made through the creation of a financial instrument that is traded in the international market.
During the term of the instrument is an account called “margin,” in which the central bank agrees to deposit a larger amount of gold in the event that the price of gold falls or in which Goldman Sachs deposits a larger amount when gold increases. “At the expiration of the transaction the contributions are returned to their owners,” the document says.
There will be an adjustment to the asset value of 10 percent, to be used as a hedge in case the international market price falls, indicating that the U.S. bank takes care that if it produces a depreciation it will be covered and Venezuela would assume risk. The annual interest rate will be a combination of dollars with the call BBA Libor equivalent to 8 percent.
In Liberty,
Mike
http://libertyblitzkrieg.com/2013/11/20/is-venezuela-selling-gold-to-goldman-sachs/