Peter Schiff : More Crisis , More Often – and Worse

Posted: February 24, 2014 | Author: | Filed under: Doom and Gloom, Gold, Precious Metals, Quantitative Easing, World Gold Council | Tags: , , , , | Leave a comment

Gold bug Peter Schiff is again promoting his company by announcing the mother of all crisis . As you read this remember he did not tell you to sell at $2,000 plus – unlike Jack a. Bass Managed Accounts.

Washington is engaged in a massive “campaign” to make Americans believe the economy is in recovery.  But in reality the United States is at the brink of a devastating economic crash that will cause catastrophic market losses and impoverish millions.

That’s according to Peter Schiff, the best-selling author and CEO of Euro Pacific Capital, who delivered his frightening warning to investors in a recent interview on CCTV.

“The problem with politicians is they don’t want to level with the voters and tell them how bad the economy really is and what the cure for the disease is,” Schiff said.

The “disease” Schiff refers to is a toxic combination of our massive $16.4 trillion debt and the Fed’s continued devaluing of the dollar through its controversial 7-year long “easing” program.

The Fed is currently purchasing $75 billion a month in Treasury and mortgage bonds, a form of stimulus.

President Obama and like-minded politicians claim this stimulus has pushed the economy forward, boosting GDP and keeping inflation low.

But Schiff says “it’s another lie.”

In fact, according to Schiff, the government has done nothing more than create a “phony” economy that is “completely dependent on the ability to borrow more money that we can’t pay back.”

“The Fed knows that the U.S. economy is not recovering,” Schiff said. “It simply is being kept from collapse by artificially low interest rates and quantitative easing. As that support goes, the economy will implode.”

“The crisis is imminent,” Schiff said. “I don’t think Obama is going to finish his second term without the bottom dropping out. And stock market investors are oblivious to the problems.”

The Impact of Federal Stimulus Measures on the Price of Gold

Posted: February 24, 2014 | Author: | Filed under: Federal Reserve, Gold, Quantitative Easing, The Federal Reserve | Tags: , , , , , , | Leave a comment

The Impact of Federal Stimulus Measures on the Price of Gold

 

Historically, the value of gold and fluctuations in its price have been linked directly to the wider economic performance. As a general rule, the value of gold tends to be most resolute during periods of recession, as investors look to commit their capital into physical assets that deliver genuine financial security.

 

The most recent statistics underline this trend, with the price of gold set the retreat from a near three-month high in the face of measured stimulus tapering in the U.S. A string of poor data releases had forced the government to initially reconsider their approach to stimulating economic growth, only for the Federal Reserve to reaffirm their commitment to restoring long-term growth.

 

The Facts and Figures: Gold Values in 2014

 

It was during the last week that the price of gold hit a three-month high, amid rising global shares and continued economic uncertainty in the U.S. While the Federal government had spoken at length during the first financial quarter about tapering their stimulus measures and laying the foundations for more sustainable, long-term growth, underperformance within the labour market has persuaded them to reconsider their stance. As a result on this, investors were encouraged to believe that the ultra-easy stimulus policy would continue for the foreseeable future.

Incoming Federal Reserve Chair Janet Yellen performed a sharp-about turn this week, however, by reiterating the U.S. Central Bank’s commitment to a measured tapering of its gold-friendly stimulus policy. While Yellen has stated that has a strong belief in the current bullion and monetary policy measures, however, the sudden drop in gold prices has forced many to question the wisdom of her decision making. More specifically, it could trigger a sudden rise in interest rates and force investors to develop a more risk-averse approach in the financial markets.

Does Gold Represent a Good Investment in 2014?

The decision to taper bullion stimulus measures will only serve to undermine the appeal of gold as an investment opportunity still further. While the presence of under-employment may have caused growth in the labour market to slow, investors have continued to disregard this and similar macroeconomic factors as being insufficient to derail the tentative global recovery. This has had a direct impact in reducing the appeal of gold, and the sudden depreciation in value will force a growing number of investors to consider alternative precious metals and commodities.

If it would be fair to say that gold holds minimal investment appeal as we approach the second financial quarter of this year, however, it is worth considering the performance of additional market options such as silver and platinum. The former, which has experienced considerable growth during the last eighteen months fell by 0.3% in the wake of recent events, while the latter gained a respectable 0.1% amid global political issues. The upshot of this appears to be that investors are likely to avoid the precious metal market for the foreseeable future, at least until the U.S. economy has adapted to its new monetary policies.

 

 

Peter Schiff : Self Promotion Helps Him – Investors Not So Much

Posted: November 4, 2013 | Author: | Filed under: Gold, Inflation, Jack a. Bass Managed Accounts, Peter Schiff, Precious Metals, Quantitative Easing | Tags: , , , , | Leave a comment

The unabashed gold bug’s Euro Pacific Capital Inc. manages a $20 million mutual fund that invests in stocks related to the metal and lost 6.4 percent since it began in July. The Philadelphia Stock Exchange Gold and Silver Index slid 1.8 percent in the same period.

Peter Schiff, chief executive officer and chief global strategist of Euro Pacific Capital Inc., predicts bullion will reverse its 21 percent year-to-date decline and probably surge 52 percent to reach a record $2,000 an ounce within a year. Photographer: Haruyoshi Yamaguchi/Bloomberg

Peter Schiff, chief executive officer and chief global strategist of Euro Pacific Capital Inc. Photographer: Jin Lee/Bloomberg

Schiff, 50, isn’t fazed that gold is heading for its first annual price drop in 13 years, or that Goldman Sachs Group Inc. has called it a “slam-dunk sell.” He predicts bullion will reverse its 21 percent year-to-date decline and probably surge 52 percent to reach a record $2,000 an ounce within a year. That’s just the beginning: Before President Barack Obama leaves office in 2017 the U.S. will default, the dollar will collapse, hyperinflation will strike and gold will skyrocket, he says.

“I’m waiting for the dollar crash, I’m waiting for the real crisis to hit that I know will benefit gold,” Schiff said Oct. 18 over lunch of spinach-and-beet salad and stewed rabbit in the sun room after the radio show. “The longer it takes, the longer I have to wait for that payday. But the longer it takes, the bigger that payday is going to be.”

Critics Laugh

With inflation at or below the Fed’s 2 percent target for the past 11 months, the Standard & Poor’s 500 stock index reaching record levels and the dollar strengthening against major currencies in the past year, Schiff knows his forecasts make some people laugh. He’s used to it. They also scoffed in 2006 when he predicted on television that housing pri

ces would plunge, lenders would go bankrupt and stocks would plummet, as they did two years later.

“They should take him seriously — he was right with a lot of other ones,” Ron Paul, the former Republican Representative from Texas who has called for abolishing the Federal Reserve and auditing the U.S. gold depository at Fort Knox, Kentucky, said by phone on Oct. 23. Schiff was an economic adviser to Paul’s presidential campaign in 2007.

No Danger

“They don’t want to admit that people in the free market are right because they would have to give up government planning and government power and give up their wars and give up the welfare state,” Paul said.

Schiff’s predictions don’t persuade Austan Goolsbee, an economics professor at the Booth School of Business at the University of Chicago and former chairman of the Council of Economic Advisers under Obama.

Gold bugs, investors who buy the metal as protection against a collapse in financial assets, fail to understand that the Fed’s pumping money into the economy only offsets banks’ tighter lending and stockpiling cash, Goolsbee said. Until credit conditions return to “normal,” there’s no danger of inflation, he said.

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AMP Gold and Precious Metals Portfolio: The Gold Investor’s Handbook Paperback – September 18

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Bass on Japan QE: The Widowmaker”

Posted: April 10, 2013 | Author: | Filed under: AMP Books and Seminars, Central Banks, Japan, Quantitative Easing | Tags: , , , , , , , | Leave a comment

KYLE BASS: On Friday, The Market Gave Us The First Glimpse Of The Japan Blowup

Kyle Bass

Kyle Bass, the hedge fund manager who has become the most prominent voice in the market betting on a collapse of Japan’s sovereign bond market, was on Bloomberg TV this morning discussing the trade.

It’s known as the “widowmaker” because Japan’s outsized stock of government debt – the largest in the world as a percentage of GDP – leaves only one conclusion for many traders.

The market has to blow up eventually, right? Except it never does.

Bass has been vocal about his call since 2010. Now, against the backdrop of the monetary policy revolution at the Bank of Japan, which just announced a massive bond buying program, the “widowmaker” trade is back in the spotlight.

Bloomberg TV anchors Erik Schatzker and Stephanie Ruhle pressed Bass to put a timeframe on his call. When exactly does he think the Japanese government bond market is going to blow up?

Bass replied that he wasn’t naïve enough to think he could guess when it would happen – but he said that on Friday, we saw the first signs that such an event could be coming.

(On Thursday, the Bank of Japan announced its massive new stimulus program. On Friday, there was a big sell-off in short-dated Japanese government bonds, causing yields to spike. The chart below shows the move.)

japanese government bond 5 year yield

Bass told Bloomberg TV:

I think it’s important to talk about the BoJ’s “shock and awe” campaign, where they are going to double the monetary base by the end of next year, which is unprecedented. They’re going to buy roughly 60 trillion yen per year of bonds in the next two years, which is 11 percent of GDP, or their whole fiscal deficit.

This is what I find fascinating in the whole situation. [The Bank of Japan] came out and told you: “The new sheriff is in town, and we’ve got you.” Right? “We’re going to buy everything we can buy. Don’t worry.”

And what happened on Friday? Investors in JGBs panicked. Which is, again, it’s really the first diversion from the 20-year norm of their ability to just swallow the numbers and not worry. They actually worried.

According to Bass, this episode illustrates that other market participants are finally coming around to his view on Japanese government bonds.

Bass said in the interview:

You have to think about – you have to get into the heads of the participants, because they all have a collective sense of fatalism.

When you do the quantitative analysis here, you know they are insolvent. Everyone that owns the bonds knows they are insolvent.

It’s a question of how long they can hang on. And what changes their views are a multitude of variables…

You never know what sparks the qualitative perceptions of investors to change, but what I saw Friday was it began to change.

I’m not saying it’s over today. I’m saying, this is the first deviation of the sanctity of that marketplace. And it was a complete panic on Friday.

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Money Stimulus Marathon’ Good for Gold Juniors and Price: Eric Winmill

Posted: February 10, 2013 | Author: | Filed under: Quantitative Easing, Speculative | Tags: , , , , , , , | Leave a comment
Sandstorm Gold Logo

Sandstorm Gold Logo (Photo credit: Wikipedia)

Eric Winmill, mining equities research analyst with Casimir Capital, sees great potential for small-cap metals producers and developers in the Americas—home to good infrastructure, skilled workers and great geology. In this Gold Reportinterview, Winmill also explains how “all-in” cash costs are making it easier for companies and investors to understand—and predict—cash-flow generation and identifies companies that he expects to take off.

COMPANIES MENTIONED : ARGONAUT GOLD INC.: BRIGUS GOLD CORP. : EASTMAIN RESOURCES INC. : GOLDCORP INC. : LUNA GOLD CORP. : SANDSTORM GOLD LTD. : ST ANDREW GOLDFIELDS LTD. : VERIS GOLD CORP.

The Gold Report: Eric, most of the companies you cover are small-cap names operating one or two mines in the Americas. Is that where investors willmake money in 2013?

Eric Winmill: We are seeing a lot of money flowing back into the Americas, along with a lot of merger and acquisition (M&A) activity in the gold space.

This is happening for all the reasons you might expect: access to skilled workers, a highly productive workforce, security of mineral rights, great infrastructure and, of course, great geology. These small- to mid-cap producers with one or two assets are typically ramping up. We focus on finding great teams and great assets as we believe these will deliver the best potential for returns this year and in subsequent years.

TGR: What valuation metric do you use or trust most?

EW: We tend to use price-to-net-asset-value (NAV) multiples. That captures most of the growth in the companies and the projects going forward and allows us to run sensitivities on gold prices and such. In some cases we incorporate price to cash flow, but rely primarily on price to NAV.

TGR: Can you give us a brief overview of Casimir Capital’s gold trading range projections for 2013?

EW: Rather than forecasting a price range, we use a fixed value. For 2013 we are using a price of $1,800/ounce ($1,800/oz), a little bit above where the quote is now.

“Small- to mid-cap producers with one or two assets are typically ramping up.”

I agree with a Barron’s quote from Darren C. Pollock at Cheviot Value Management LLC, who said, “We are in the middle of a monetary stimulus marathon, this is no sprint.” Just about all of the major currencies are “reflating” at the moment. Against that backdrop, we are bullish on gold prices through 2013 and into 2014.

TGR: Does your spot price drop in 2014?

EW: Under our peak-pricing scenario, we forecast $1,900/oz in 2014. We move to a long-term price of $1,400/oz after 2016.

TGR: Since mid-July 2012 you have turned over or dropped 6 of 15 the companies you cover. Why such significant change?

EW: It really is not as significant or as unusual as it appears. One company, Prodigy Gold Inc., was taken out by Argonaut Gold Inc. (AR:TSX). That is the kind of scenario you want to see.

“It is all about a renewed focus on smart projects and efficient capital allocation.”

Three others were transferred to a colleague who joined us last summer. He had covered those firms at his prior shop and it made sense to hand them over to him.

The remaining two names were ones I covered with my previous company. When I joined Casimir, I inherited 10 names that demanded a lot of time although I would look to relaunch on those going forward.

TGR: Of the 10 companies, which is the most likely to receive a takeover offer?

EW: That is a good question, given that takeover “optionality” is a part of what we look for in the companies we cover. We see takeover potential underpinning or sweetening the valuation. However, looking solely for takeover targets as an investment strategy is not really our mandate.

Nonetheless, as companies surface value in their key assets, it is natural to suspect that they might be takeover targets. One example is Luna Gold Corp. (LGC:TSX.V), which is ramping production at its Aurizona mine in Brazil. Next year, production will reach 125,000 oz (125 Koz)/year. The company has a long-term plan that could take production up to 300 Koz/year or even 500 Koz/year. That kind of asset could be very attractive to midtier or even senior gold companies.

TGR: What are the longer-term expansion plans at Aurizona?

EW: Luna Gold has a very clear expansion strategy at Aurizona. The company is working through a phase 1 expansion right now. In the next few months we expect news on a phase 2 expansion that could add another 100 Koz/year or more.

Looking down the road, Luna Gold has a very promising property right next to the Aurizona property called Luna Greenfields. The company intends for that to be the source of its next gold mine. Including underground potential, it could drive production to 300–500 Koz/year.

TGR: Does Luna Gold plan to mine the high-grade portion of that first to generate early cash flow? If so, could we see a slight drop from production at Aurizona over the next couple of years?

EW: I would not call it “high-grading” per se. Right now, Luna is mining a lot of the near-surface saprolite-type ores. These are very easy and cheap to process. Down the road, the company plans to do some crusher improvements to facilitate processing of more of the deeper fresh rock ore.

TGR: How do Luna Gold’s cash costs of roughly $705–715/oz compare with other companies of similar size?

EW: Luna Gold would probably be on the lower end of the junior to midtier gold producers.

In Luna Gold’s latest guidance, it presented an “all-in sustaining cash cost” measure. This is a new trend in the industry to help investors understand better which companies are adding cash to the balance sheet. Luna Gold is suggesting a 2013 all-in cost just over $1,000/oz. I think that stacks up very well against the juniors and even the midtiers and some of the seniors.

“The industry trend toward reporting all-in sustaining cash costs should help investors make better decisions.”

Another interesting company is Eastmain Resources Inc. (ER:TSX), which is exploring its Eau Claire deposit in the James Bay region of Québec, Canada. Goldcorp Inc. (G:TSX; GG:NYSE) recently increased its stake in Eastmain to 9.9%. Eau Claire is right next door to Goldcorp’s Éléonore project. It is fair to say that Goldcorp is watching very keenly what is happening there. Eau Claire has to be on the radar screen of a lot of potential acquirers.

TGR: Eastmain has a Measured and Indicated resource of 2.5 million ounces (2.5b Moz), and your valuation puts those ounces at roughly $100/oz in the ground. Is that a bit high given the devaluation of ounces-in-the-ground resources we have seen recently?

EW: We think $100/oz is a reasonable number in this instance. In the M&A landscape certain assets are commanding a real premium in the eyes of acquirers. Often those are very high-grade deposits with great infrastructure or great synergies with established companies. In those cases, it is not unreasonable to think that large premiums could be paid.

TGR: What advantages does Eastmain have over other similar-sized companies?

EW: One advantage is that Eastmain is operating in the Americas, and in Québec in particular. It is a great spot for exploration projects. Eastmain has good access to infrastructure, skilled talent and world-class geology: high-grade results near surface and at depth and a deposit that is wide open in many directions.

TGR: Doesn’t an average of roughly 4 grams per ton (4 g/t) in an open-pit scenario seem quite positive?

EW: Yes, that is one of the reasons we like it. In 2013, we should see Eastmain do about 25,000 meters (2,500m) of drilling at its flagship Eau Claire project.

TGR: Of the companies you cover, some are up and some are down. Of those that are down, which is the most likely to rebound from a tough year in 2012?

EW: There is no doubt that the junior to mid-cap sector has been challenging for investors in the last 12 months. However, we are looking for catalysts in 2013 from a number of companies.

Luna Gold’s expected news about its phase 2 expansion should be positive for that stock. Another isSt Andrew Goldfields Ltd. (SAS:TSX), an underground producer in the Timmins Camp. The company is completing a bulk sample from its Taylor underground project in 2013. As St Andrew continues to demonstrate consistent results, its shares could move higher.

TGR: St Andrew met its production guidance for 2012. What is its forecast for 2013?

EW: In 2013, we have St Andrew producing just over 100 Koz. The company is scheduled to release financial results later this month, which should provide more clarity on the 2013 outlook.

TGR: What are its cash costs?

EW: We have cash costs at about $960/oz.

TGR: Production of 100 Koz in 2013 would be about 6 Koz over 2012. Where else does St Andrew’s long-term growth lie?

EW: When the company brings the Taylor underground project on-line, it will have four mines in production. We could see production climbing to over 125 Koz/year by late 2013, early 2014.

TGR: Last month you launched coverage of Veris Gold Corp. (VG:TSX; YNGFF:OTCBB), previously called Yukon-Nevada Gold Corp. (YNG:TSX). Veris is slated to dramatically increase gold production in 2013. What should investors expect from Veris this year?

EW: We see 2013 as a very exciting year for Veris. The company owns and operates the Jerritt Canyon mine in Nevada. This is a storied asset that has produced nearly 8 Moz of gold since the early 1980s.

In 2012, the company produced 108 Koz gold. This year we could see production upward of 170 Koz from three underground mines.

One of the big catalysts we are looking for from Veris is its plan to do toll milling. The company’s roaster in Nevada has spare capacity to treat refractory ore. We expect Veris to start toll-milling third-party ore. This could generate significant revenue and help drive its cash costs down.

The company also has a huge land package in Nevada: 120 square miles only 35 miles from the Carlin Trend. It contains some very interesting targets that Veris plans to drill off later this year.

TGR: Veris had some exploration success at Jerritt Canyon, too. One hole hit 49.7m of 8.3 g/t gold. What did you make of that?

EW: Those results were from the Smith underground mine and are indicative of the type of high-grade results we might see going forward. It is a prolific district with a long history of production and the right kind of geology for new discoveries as well.

TGR: You have a buy rating on Veris and target price of $3.80, correct?

EW: Yes.

TGR: Of your strong buy ratings, we have talked about two of them—Luna Gold and St Andrew. What are the other two?

EW: They are Sandstorm Gold Ltd. (SSL:TSX) and Brigus Gold Corp. (BRD:NYSE.MKT; BRD:TSX).

Sandstorm is a gold royalty and streaming company. It has a portfolio of producing assets and is different from a traditional gold producer in that it provides early-stage financing in exchange for a portion of the gold sales. Nolan Watson and his team have done a terrific job of creating value. Investors get a lot of upside participation in gold prices without the traditional operating and capital expense risk.

TGR: It certainly seems to be an almost ideal way to play the space. Does Sandstorm have enough production coming onstream to get royalty streams at good prices?

EW: Absolutely. Sandstorm has a very full pipeline of deals. It just acquired a 60% interest in Premier Royalty Inc. (NSR:TSX), a new royalty company that just started trading in December 2012. The fact that Sandstorm has taken control is indicative of the kind of innovative, value-added transactions we think investors can look forward to.

TGR: And Brigus?

EW: Brigus has the Black Fox mine in Timmins. It is an open-pit and underground mine that Brigus has done a great job on, ramping up production. The company recently brought on Daniel Racine as chief operating officer, and he has just assumed the role of president. Racine has worked at Agnico-Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) for many years. Brigus has put together a really strong team and the result can be seen in its latest production results. Cash costs are declining and production is increasing. Longer term, Brigus is drilling off its Grey Fox property, not far from Black Fox, and hopes to bring it into production in early 2015.

TGR: Other pundits in this space believe that a business combination of Brigus and St. Andrew makes sense. Do you agree?

EW: Certainly, when you look at the land map of the two companies’ assets, there could be operational synergies. But I really could not speak to any of the particulars of that kind of a combination.

TGR: What are the biggest catalysts for Brigus in 2013?

EW: We should see the company’s financial results for Q4/12 by the end of March.

We anticipate a feasibility study of Grey Fox in the latter half of 2013. The company is talking about 2013 production of 90–100 Koz, up from 77 Koz in 2012. It could be an exciting year for Brigus.

TGR: A couple of years ago Brigus was in turnaround. Is that process complete?

EW: The company has been growing production at Black Fox and the latest results suggest that the operation is hitting its stride.

TGR: Can you give our readers a reason or two to be hopeful in 2013, after a difficult 2012?

EW: I think the industry as a whole has gotten the message loud and clear that it is all about a renewed focus on smart projects and efficient capital allocation, not just growth for growth’s sake. In addition, the industry trend toward reporting all-in sustaining cash costs should help investors make better decisions about which companies are really adding cash to the balance sheet.

TGR: Eric, thank you for your time and your insights.

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Merk Funds’ 2013 Gold Outlook

Posted: January 15, 2013 | Author: | Filed under: Gold, Inflation, Precious Metals, Quantitative Easing | Leave a comment
POSTED ON JANUARY 14, 2013 BY 

Merk Funds is one of the biggest names in the currency space, and their products have amassed a fair amount of assets as well as attention from the investing world. But the firm has also begun moving into the gold space by laying out plans for a physical gold ETF (OUNZ). With this highly anticipated fund on tap, many investors have been keeping a close eye on Merk’s outlook on the precious metal, especially in light of the fiscal cliff and its impact on gold .

For the coming fiscal year, Merk had this to say concerning gold.

“We expect the volatility in gold to be elevated in 2013, but consider it good news, as it keeps the momentum players at bay. We own gold not for the crisis of 2008, not for the potential contagion from Europe, but because there is too much debtin the world. We think inflation is likely a key component of how developed countries will try to deal with their massive debt burdens, even as cultural differences will make dynamics play out rather differently in different countries.”

GoldThis certainly is an interesting take given that many have been using gold as a defense against a possible global meltdown. Merk seems to be one of the few admitting that holding gold is still a good idea even if markets around the world are not headed for a massive collapse. Instead, Merk’s theory means that gold can still perform well, even if benchmarks around the world surge, as many nations will be forced to face their debts sooner rather than later..

For the United States that time will come in February, as Congress has already begun debates on the U.S. debt ceiling and spending figures. If the last Fiscal Cliff debate is any indication, this one will come down to the wire, and it could have a marked impact on gold’s short-term outlook. Some have proposed harsh spending cuts, while others have gone as far as to suggest minting one or more trillion-dollar platinum coins to pay off our debt. No matter which camp you fall in, Merk believes that gold stands to be the beneficiary of piling debts in the world’s developed markets.

Why Marc Faber Will Never Stop Buying Gold

Marc Faber, author of the famed “Gloom, Boom & Doom Report,” is a respected name in the investing world. If ever there was a perma-bear, it would be Faber. He tends to focus on areas of the world that he sees problems in and allow that information to influence his investing decisions. But no matter what segment Faber has an eye on, his focus always circles back to one asset: gold. The precious metal has long been an important part of his holdings, and he has not been shy about vocalizing his love for the commodity .

Faber’s Gold Strategy

As 2013 opened, Faber was quick to note that the threat of inflation around the world coupled with a weak dollar has him very worried about the future of the global economy. His solution? He buys gold every single month, waiting for a 20% price correction. Though gold took a hit at the end of 2012, Faber is waiting for a further drop to shake out all of the speculators and those with margin calls so he can make a more meaningful increase to his position.

GoldFaber has also stated that he intends to hold the precious metal for as long as he lives. “I will never sell my gold in my life. As long as I have to look at people like Mr. Bernanke and Mr. Obama I will always buy gold each month.” Though Bernanke will likely end his time at the Fed in 2014 and Obama will exit the White House in 2016, Faber seems comfortably set in his ways. Unlike other experts, he is not concerned that 2013 will bring an end to gold’s 13 consecutive positive years, as he feels that there are too many issues around the world for gold not to go up.

Faber joins a long list of those who have put a fair amount of trust in this precious asset, includingprominent names like George Soros, John Paulson, Jacob Rothschild and Peter Schiff among others. The former three are all heavily invested in the SPDR Gold Trust (GLD) though Schiff does not share the same optimism for the fund. This will be a make-or-break year for this commodity, as markets flirt with pre-recession highs and investors slowly move into “risk on” purchasing. Faber’s bullishness on the metal will certainly be tested in the coming months, as it remains to be seen if the metal can find its footing after falling out of the graces of many towards the end of 2012.

Happy Anniversary Helicopter Ben!

Posted: November 22, 2012 | Author: | Filed under: Bernanke, Central Banks, Inflation, Quantitative Easing, The Federal Reserve | Tags: , , , , , , , | Leave a comment

 

Happy Anniversary Helicopter Ben!

Posted: 21 Nov 2012 11:13 AM PST

Happy anniversary Helicopter Ben!

It was 10 years ago today that Mr. Bernanke gave his speech titled “Deflation: Making Sure ‘It’ Doesn’t Happen Here” as at the time some “expressed concern that we may soon face a new problem, the danger of deflation or falling prices” as reported inflation rates were low at the time as the economy was in its post stock market bubble malaise.

In the speech he said, “US dollars have value only to the extent that they are strictly limited in supply. But the US Government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many US dollars as it wishes at essentially no cost. By increasing the number of US dollars in circulation, or even by credibly threatening to do so, the US government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services.

We conclude that, under a paper money system, a determined government can always generate higher spending and hence positive inflation.” He then went on to ironically say, “Of course, the US government is not going to print money and distribute it willy-nilly (although as we will see later, there are practical policies that approximate this behavior).”

The CRB index proceeded to rally 159% over the following six years and gold, on that day in 2002 at $317.60, has ‘only’ risen 444% since. We have now 10 years of economic results and the attached debt due to the Fed’s attempt to avoid deflation after the 2001-2002 stock market bubble popping induced recession.

http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm
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Soros Buying Gold as Record Prices Seen on Stimulus

Posted: November 20, 2012 | Author: | Filed under: Central Banks, Gold, Inflation, Precious Metals, Quantitative Easing, The Federal Reserve | Tags: , , , , , , , | Leave a comment

Nov 19

from Bloomberg

Gold’s 12-year rally, the longest in at least nine decades, is poised to continue in 2013 as central bank stimulus spurs investors from John Paulson to George Soros to accumulate the highest combined bullion holdings ever.

The metal will rise every quarter next year and average $1,925 an ounce in the final three months, or 12 percent more than now, according to the median of 16 analyst estimates compiled by Bloomberg. Paulson & Co. has a $3.62 billion bet through the SPDR Gold Trust (GLD), the biggest gold-backed exchange- traded product, and Soros Fund Management LLC increased its holdings by 49 percent in the third quarter, U.S. Securities and Exchange Commission filings show.

Central banks from Europe to China are pledging more steps to boost growth, raising concern about inflation and currency devaluation. Investors bought 247 metric tons through ETPs this year, exceeding annual U.S. mine output. While both sides said talks Nov. 16 between President Barack Obama and Congress over the so-called fiscal cliff were “constructive,” the Congressional Budget Office has warned the U.S. risks a recession if spending cuts and tax rises aren’t resolved.

“We see gold as a hedge against the follies of politicians,” said Michael Mullaney, who helps manage $9.5 billion of assets as chief investment officer at Fiduciary Trust in Boston. “It’s a good time to garner some protection in portfolios by having some real asset like gold.”

Longest Streak

Gold advanced 10 percent to $1,723.79 in London this year, headed for a 12th consecutive annual gain, the longest streak in data compiled by Bloomberg going back to 1920. Prices reached a record $1,921.15 in September 2011. The Standard & Poor’s GSCI gauge of 24 commodities gained 1 percent and the MSCI All- Country World Index (MXWD) of equities climbed 7.9 percent. Treasuries returned 2.8 percent, a Bank of America Corp. index shows.

Bullion held through ETPs, the first of which listed in 2003, reached a record 2,603.7 tons on Nov. 16, valued at $144.3 billion. That exceeds the official reserves of every nation except the U.S. and Germany, World Gold Council data show. The SPDR Gold Trust alone holds 1,342.6 tons.

Soros increased his investment in the trust to 1.32 million shares in the third quarter, the most since 2010, a Nov. 14 SEC filing showed. The stake, with each share representing about a 10th of an ounce, is valued at $219 million. Prices advanced 59 percent since January 2010, when Soros called gold the “ultimate asset bubble.” Michael Vachon, a spokesman for the 82-year-old who made $1 billion breaking the Bank of England’s defense of the pound in 1992, declined to comment.

Official Reserves

Paulson, who became a billionaire in 2007 by wagering against the subprime mortgage market, owns 21.8 million shares in the SPDR Gold Trust, making him the biggest shareholder, a Nov. 15 SEC filing showed. The 56-year-old raised his stake by 26 percent in the second quarter and his holding of about 66 tons exceeds the official reserves of nations from Brazil to Bulgaria to Bolivia.

The New York-based hedge fund company reduced its investments in Anglogold Ashanti Ltd. (ANG) and Gold Fields Ltd., the third- and fourth-biggest producers. Armel Leslie of Walek & Associates, a spokesman for Paulson’s fund, declined to comment.

Paul Touradji’s Touradji Capital Management LP sold all of its 82,000 shares in the SPDR Gold Trust in the third quarter, according to an SEC filing. Lone Pine Capital LLC, the hedge fund run by Stephen Mandel Jr., cut its stake by 31 percent to 2.6 million shares, and Dan Loeb’s Third Point LLC lowered its bet by 10 percent to 130,000 shares, filings showed last week. Officials from all three companies declined to comment.

Eight Strategists

While some investors expect stimulus to devalue currencies, the median of eight strategist estimates compiled by Bloomberg show the U.S. Dollar Index, a measure against six major trading partners, will average 82.6 next year, from 81 now. Steven Englander, Citigroup Inc.’s head of G-10 strategy, said in an interview this month that the currency market is signaling it isn’t yet convinced the Federal Reserve will fulfill its pledge to pump record amounts of cash into the economy through 2015.

Third-quarter demand for gold fell 11 percent, the most since 2009, as China’s slowing growth curbed purchases, the London-based World Gold Council said Nov. 15. India, the biggest buyer in the quarter, consumed 24 percent less in the year’s first nine months as bullion priced in rupees reached a record in September. The Washington-based International Monetary Fund cut its 2013 forecast for world growth twice since July, to 3.6 percent.

Inflation Adjusted

While prices rose 24 percent since November 2010, the size of the futures market, based on contracts outstanding, fell 29 percent, bourse data show. The metal, down 4 percent from this year’s high, has yet to exceed previous records when adjusted for inflation, with its 1980 record of $850 equal to $2,398 today, data compiled by the Fed Bank of Minneapolis show.

Hedge funds and other large speculators pared bets on a rally in futures traded on the Comex bourse in New York by 29 percent since Oct. 9, U.S. Commodity Futures Trading Commission data show. They’re still holding a net-long position of 140,162 futures and options, about 10 percent more than this year’s average, and increased wagers by 7.7 percent last week.

The Fed said Oct. 24 it will maintain $40 billion in monthly purchases of mortgage debt and probably hold interest rates near zero until mid-2015. The European Central Bank said it’s ready to buy bonds of indebted nations and the Bank of Japan raised its asset-purchase program for the second time in two months on Oct. 30.

Quantitative Easing

Gold rallied 70 percent as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011.

Investors buying bullion as a hedge against inflation and a weaker dollar generally earn returns only through price gains, increasing its allure as interest rates decline. It rose sixfold since the end of 2000, beating the 34 percent advance in the S&P 500, with dividends reinvested, and the 91 percent return on Treasuries. The Dollar Index fell 26 percent.

The first face-to-face meeting between Obama and leaders from Congress on the fiscal cliff yielded optimism and few details about how it would be resolved. The $607 billion of automatic spending cuts and tax increases is scheduled to take effect in January. U.S. equities and Treasuries rose Nov. 16 and gold futures were little changed.

Options Trading

Credit Suisse Group AG’s Tom Kendall, the most accurate gold forecaster tracked by Bloomberg over the past two years, sees prices averaging $1,880 in the fourth quarter next year and UniCredit SpA’s Jochen Hitzfeld, ranked second, expects $1,950. Deutsche Bank AG’s Daniel Brebner, the next most accurate, predicts $2,300 in the third quarter.

Options traders are also bullish, with the eight most widely held contracts conferring the right to buy at prices from $1,800 to $2,200 between November and March, Comex data show.

Central banks added to reserves for 19 consecutive months through August, the longest streak since 1964, IMF data show. Nations from Russia to South Korea to Mexico bought more to bring combined holdings to 31,461 tons, equal to about 18 percent of all the metal ever mined.

Barrick Gold Corp. (ABX), the world’s largest producer, will report a 41 percent gain in profit to a record $5.04 billion next year, the mean of 10 analyst estimates compiled by Bloomberg shows. The Toronto-based company’s shares fell 27 percent this year and will gain 45 percent in the next 12 months, according to the average of 23 forecasts.

Monetary Stimulus

Analysts predict Newmont Mining Corp. (NEM) and AngloGold Ashanti, the next-biggest, will also report the most profit ever next year.

“It looks as though global monetary stimulus is likely to continue, particularly in the wake of growing fiscal austerity,” said Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion of assets. “That puts pressure on the monetary authorities to stimulate the economy and that will debase the currencies and put a bid under gold.”

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A Precondition For Hyperinflation Is Upon Us

Posted: November 16, 2012 | Author: | Filed under: Bonds, Central Banks, Interest Rates, Quantitative Easing | Tags: , , , , , , , | Leave a comment
Las Vegas bail bonds financing

Las Vegas bail bonds financing (Photo credit: 911 Bail Bonds Las Vegas)

When Genius Failed

When Genius Failed (Photo credit: Wikipedia)

 nov. 16

Yves Lamoureux

an analyst at Macquarie Private Wealth

 

I was a super bull of long-term bonds. I stated my case over 3 years ago with a yield target on 30-year maturities of 2.5%. Back then, the timing and structure looked right for another run to new highs. Discussions about hyperinflation were premature.

The pre-condition I had been waiting for has now arrived. In my opinion, we have seen the end of the bull market in bonds.

There is a delicate balance in time, where mega trends and short term trends meet. Price has now shaped reasoning and convinced investors of future stability, and such conviction could not come at a worse time. You see, we are heading toward the D.I.I.G. Can you dig it?

The Demographically Influenced Investment Gap is one giant mismatch of assets to liabilities. The growing future needs of financing in equities and bonds cannot be matched with future available disposable savings.This will create great opportunities for long term patient investors as assets compete for your dollars.

Hyperinflation in the sense that people understand it today will not surface as expected as it is not straightforward.

The roadmap that we had been following involved removing investment choices one after another. We had the big boom of equities back in the 1990’s, when boomers converted their term deposit gradually to stock funds. It represented the first bubble and as one can see, we are at similar levels of that decade.

Following that first stock crash, we had an exodus of investors moving to real estate and there we created our second bubble. Essentially, both stocks and real estate have been written off as principal choices of investment, and what remains and is now the prime focus of investing, are bonds.

As a pre-condition to hyperinflation this choice must be removed as well and it will be.

In the end, the herd will move to whatever play has not hurt them already.

Lost choices remain the key driver of the herd crowding into hard assets.

My own view of the coming loss of confidence or of a crystallizing moment is not based on high inflation but its substitute, i.e., credit risk. It might be a philosophical difference to other views, but in the end, the result is the same. Bonds have tended to act as expected as risk preference shifted. However, bonds now have neither a credit risk premium and nor an inflation risk premium. Our proprietary model is clear: treasury paper of 30 years has the correct valuation of 3.50% and above. That is the level we would feel confident as buyers.

There will be short-term long opportunities in bond market, but they will be within the context of a very long term bear market. The coming volatility in rates will be huge an unnerving for the regular investor who opted for the stability of his capital. In my opinion, being both long and short would be an interesting proposition.

The bull market in bonds is dead. Long live bonds!Related articles

FOMC Minutes :Members Like The Idea Of Adopting Quantitative Targets

Posted: November 14, 2012 | Author: | Filed under: Bernanke, Central Banks, Federal Reserve, Forecasts, Quantitative Easing | Tags: , , , , , , , | Leave a comment
Modern-day meeting of the Federal Open Market ...

Modern-day meeting of the Federal Open Market Committee at the Eccles Building, Washington, D.C. (Photo credit: Wikipedia)

FOMC Minutes Reveal That Many Members Like The Idea Of Adopting Quantitative Targets

 

FOMC minutes are out.  

The headline is that the Fed says a number on the FOMC favored more QE after Operation Twist. No big surprise there.

However, the minutes do devote a significant amount of space to discussing tying Fed policy to explicit unemployment targets, as observers on Wall Street were watching for.

The view on the Committee toward the idea seems to be mixed, and the minutes spell out the case both for and against such targets.

Here are the key paragraphs we were looking for discussing tying quantitative easing to specific unemployment targets:

Thresholds and Forward Guidance

A staff presentation focused on the potential effects of using specific threshold values of inflation and the unemployment rate to provide forward guidance regarding the timing of the initial increase in the federal funds rate. The presentation reviewed simulations from a staff macroeconomic model to illustrate the implications for policy and the economy of announcing various threshold values that would need to be attained before the Federal Open Market Committee (FOMC) would consider increasing its target for the federal funds rate.

Meeting participants discussed whether such thresholds might usefully replace or perhaps augment the date-based guidance that had been provided in the policy statements since August 2011. Participants generally favored the use of economic variables, in place of or in conjunction with a calendar date, in the Committee’s forward guidance, but they offered different views on whether quantitative or qualitative thresholds would be most effective.

Many participants were of the view that adopting quantitative thresholds could, under the right conditions, help the Committee more clearly communicate its thinking about how the likely timing of an eventual increase in the federal funds rate would shift in response to unanticipated changes in economic conditions and the outlook. Accordingly, thresholds could increase the probability that market reactions to economic developments would move longer-term interest rates in a manner consistent with the Committee’s view regarding the likely future path of short-term rates.

A number of other participants judged that communicating a careful qualitative description of the indicators influencing the Committee’s thinking about current and future monetary policy, or providing more information about the Committee’s policy reaction function, would be more informative than either quantitative thresholds or date-based forward guidance. Several participants were concerned that quantitative thresholds could confuse the public by giving the impression that the FOMC focuses on a small number of economic variables in setting monetary policy, when the Committee in fact uses a wide range of information.

Some other participants worried that the public might mistakenly interpret quantitative thresholds as equivalent to the Committee’s longer-run objectives or as triggers that, when reached, would prompt an immediate rate increase; but it was noted that the Chairman‘s postmeeting press conference and other venues could be used to explain the distinction between thresholds and these other concepts.

Participants generally agreed that the Committee would need to resolve a number of practical issues before deciding whether to adopt quantitative thresholds to communicate its thinking about the timing of the initial increase in the federal funds rate. These issues included whether to specify such thresholds in terms of realized or projected values of inflation and the unemployment rate and, in either case, what values for those thresholds would best balance the Committee’s objectives of promoting maximum employment and price stability.

Another open question was whether to supplement thresholds expressed in terms of the unemployment rate and inflation with additional indicators of economic and financial conditions that might signal a need either to raise the federal funds rate before a threshold is crossed or to delay until well afterward.

A final question was whether the statement should also provide forward guidance about the likely path of the federal funds rate after the initial increase. It was noted that such guidance could have significant effects on financial conditions and the economy. At the conclusion of the discussion, the Chairman asked the staff to provide additional background material, taking into account the range of participants’ views.

Participants generally agreed that the Committee would need to resolve a number of practical issues before deciding whether to adopt quantitative thresholds to communicate its thinking about the timing of the initial increase in the federal funds rate. These issues included whether to specify such thresholds in terms of realized or projected values of inflation and the unemployment rate and, in either case, what values for those thresholds would best balance the Committee’s objectives of promoting maximum employment and price stability. Another open question was whether to supplement thresholds expressed in terms of the unemployment rate and inflation with additional indicators of economic and financial conditions that might signal a need either to raise the federal funds rate before a threshold is crossed or to delay until well afterward. A final question was whether the statement should also provide forward guidance about the likely path of the federal funds rate after the initial increase. It was noted that such guidance could have significant effects on financial conditions and the economy. At the conclusion of the discussion, the Chairman asked the staff to provide additional background material, taking into account the range of participants’ views.

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