Thanks for the update on WHT. It is one of my favorites, and I continue to hold all of my position. ============================================================== Hi ml, I only hold my core WHT right now. Sold the extras above $2. I'm still holding out for the PoG to see the $355 level again, where I intend to reload the extras in about a dozen or so miners, but seeing the COMEX Gold Futures OI drop another 30K (as of 10-8) from last weeks report (277K) is now causing me to doubt a break that severe.
I wish Roach would do a column on base metals..... anyway, now that I have your attention........ <VBG> =============================================================
Global: The Blame Game
Stephen Roach (New York) October 10, 2003
Tough economic times always produce scapegoats. Politicians and policy makers are invariably quick to point the finger elsewhere rather than face up to their own failings. Such is the human condition. America’s jobless recovery is a case in point. The US body politic is now taking dead aim at China -- making it the poster child for the latest outbreak of scapegoatism. The risk is that the blame game won’t stop there. America’s multinational corporations could well be next in line, as protectionism morphs into old-fashioned populism. As always, those pointing the finger usually have the most to hide. That’s precisely the case today. As I see it, the real problem is made in America. Washington is engaged in the most reckless fiscal policies since the “guns and butter” blunders of the late 1960s.
Lost in the din of the politically-inspired blame game is the inarguable power of a simple macro accounting identity: Saving must always equal investment. This isn’t some wild-eyed theory -- it’s just the way that any economy must always balance its books. If a country is lacking in domestically generated saving -- precisely the case in the United States today, with its rock-bottom 0.7% net national saving rate in the first half of 2003 -- it is faced with two stark choices: It can either rebuild domestic saving by suppressing aggregate demand or borrow surplus saving from abroad. Inasmuch as suppressing aggregate demand is not exactly politically palatable, America has opted to finesse its accounting identity by borrowing from abroad. Such a choice, of course, is not without consequences. In order to attract the foreign capital, the US must run massive current-account and trade deficits. In case you haven’t noticed, that’s exactly what’s happened -- America’s current-account deficit stood at a record 5.1% of GDP in the first half of 2003, and the trade deficit made up about 90% of that imbalance. In other words, for a saving-short US economy, the macro accounting identity virtually guarantees a massive trade deficit.
It’s the hows and whys of this conundrum that are at the heart of the blame game. Why does America have such a serious shortfall in national saving? The private sector -- consumers and businesses -- certainly bears some responsibility. Net private saving stood at only about 4.5% of Gross National Product (GNP) in mid-2003 -- a non-trivial shortfall from the 6.25% average of the 1990s. But there can be no mistaking the real culprit behind America’s vanishing net national saving rate -- the government sector. Over the past three years, the government balance -- federal plus state and local units -- has basically swung from a 3% surplus to a 4% deficit as a share of GNP. To me, that’s the smoking gun: The dramatic deterioration in public-sector finances has been enough, in and of itself, to have accounted for the overwhelming bulk of America’s recent shortfall in national saving. And, of course, courtesy of the latest round of tax cuts enacted this spring, the Federal budget is expected to go deeper into deficit over next year -- underscoring the risk of a further deterioration in national saving and a related widening of the trade deficit.
Try telling that to Washington. I did in recent testimony on US-China relations, and the message fell on deaf ears (see Getting China Right, September 25, 2003). In fact, it’s at this point in the political process that the blame game kicks in and China enters the equation. Unwilling to accept any responsibility for its role in causing an unprecedented shortfall in national saving, politicians are reacting to America’s massive trade deficit and related job losses as if they’ve appeared out of thin air. Congress has used the trade gap as a foil to justify rising protectionist sentiment -- especially China bashing.
On the surface, there appears to be good reason for that. After all, China accounts for the largest portion of the overall US trade deficit -- some $103 billion in 2002 and probably in excess of $120 billion in 2003. But there’s one critical flaw in this approach: China is the means by which America finances its saving-short economy -- it is not the reason why we have a trade deficit. And, by the way, as long as a saving-short US is forced to run a trade deficit, getting low-cost, high-quality goods from China is certainly in America’s best interest. Not only does it give US consumers a break in purchasing power but, courtesy of China’s willingness to recycle its trade earnings back into dollar-denominated assets, it also helps provide America with the low interest rates so desperately needed to underwrite economic recovery. Which takes us to the essence of the blame game: If the United States truly wanted to eliminate its trade deficit with China -- or, for that matter, with any other nation -- it would need to rebuild domestic saving. To me, that unmasks the real culprit in all of this: America’s irresponsible fiscal policy.
Yet my real fear is that this blame game is only beginning. The trade deficit and the China factor are today’s lightening rods. If Washington stays fixated on these problems, the risks of trade frictions and protectionism can only grow. But if the angst of America’s jobless recovery persists -- something I fully expect -- there is a good chance that the politics of protectionism could morph into something else. Next on my list of likely culprits is Corporate America -- namely, US multinationals who have turned to offshore outsourcing as a means of competitive survival. Here, as well, I believe the case against this key aspect of globalization is a weak one. Low-cost sourcing expands domestic purchasing power. But in doing so, it poses a serious challenge to high-wage workforces of high-cost US producers -- not just in manufacturing industries but increasingly in the once sacrosanct services sector (see my October 6 dispatch, “The Global Labor Arbitrage”). And that could fan the political flames even more. After all, US Commerce Department data show that nonbank American multinationals employed some 9.6 million workers in offshore subsidiaries in 2000 (latest official data point) -- up nearly 50% from 1990. My concern is that US politicians could begin to turn their attention to this aspect of the job drain, holding US multinational corporations responsible for shifting product and work offshore. For a Washington power structure that refuses to accept responsibility for its role in causing America’s massive trade deficits, another such twist in the blame game would not be surprising.
All this smacks of an eerie sense of déjà vu. In my view, Washington is going down the same dangerous road it did in the late 1960s -- building on the economic hubris of a failed boom and attempting to provide both guns and butter to a clamoring electorate. Back then, it was Vietnam and the Great Society. Today, it is Iraq and the war on terrorism, together with tax reform. Alas, there’s a major difference between today and the late 1960s: Back then, the US had an ample reservoir of net private saving -- close to 10% of GNP. Today, net private saving is running at less than half that rate. In other words the US was actually in a much better position to go for guns and butter in the late 1960s than it is today. At the core of the blame game is an utter lack of any institutional memory of that earlier period. Dr. Timothy Leary, one of the most notorious icons of the Sixties, put it best, “If you remember the 1960s, you weren’t there.” Maybe that’s the point.
Hi mlsoft, good to see you posting again. Your insights are missed (at least by me). Hope you have not been ill or otherwise indisposed. Anyway, good to have you back.
Pretty good idea by the Goldcorp braintrust (prolly McEwen). Responsibility for paying the monthly dividend makes GG shares somewhat less attractive for shorting purposes. Quarterly earnings #'s out later this evening.
Goldcorp Increases Dividend Again - by 20%
Tuesday October 21, 7:07 pm ET
NOW PAYABLE MONTHLY
TORONTO--(BUSINESS WIRE)--Oct. 21, 2003-- (All dollar amounts in United States dollars (US$)) GOLDCORP INC. (GG:NYSE; G:TSX) is pleased to announce its intention to increase its total annual dividend payment by 20% (twenty per cent) to US$0.18 per share from US$0.15 per share. The frequency of the dividend payments will also increase from 6 times to 12 times per year - that is, dividends will now be paid monthly!
Year to date, 2003 shareholders have received 5 bi-monthly payments of $0.025 per share for a total of $0.125 per share. The intention is that during the remainder of 2003 shareholders will receive 2 additional monthly dividend payments of $0.015 per share. The first of these will be declared in the near future. The first full year of monthly dividend payments will be 2004.
Goldcorp believes that gold is in a bull market and has continued to state its intention to increase its dividend payment as the gold price rises. With the gold price now recently reaching levels not seen in more than 7 years, the Company is extremely pleased to be able to deliver on this promise. Dividend payments were initiated in February 2001 after the Red Lake Mine successfully began commercial production. Since that time Goldcorp has increased the dividend payment four times for a total increase of 260%.
Goldcorp's Red Lake Mine is the richest gold mine in the world. The Company is in excellent financial condition: has NO DEBT, a Large Treasury and Strong Cash Flow and Earnings. GOLDCORP is completely UNHEDGED. Goldcorp's shares are listed on the New York and Toronto Stock Exchanges under the trading symbols of GG and G, respectively and its options trade on the American Stock Exchange (AMEX), the Chicago Board of Options Exchange (CBOE) and the Pacific Stock Exchange (PCX) in the United States and on the Montreal Exchange (MX) in Canada.
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