Month: March 2013

By MoneyMorning.com.au

That’s the second day all done and dusted.

I’m just about done.

Everyone was flagging today and the crowd in the conference hall visibly thinned out.

I spent the afternoon at a separate resources conference that was taking place nearby. It involved fund managers and some of the mining companies from the Mines & Money conference.

I managed to get a lot of one-on-one time with management in one sitting. It was like speed-dating with resource stocks.

That was kind of the focus for me today, chatting to management…I hit up about 25 companies. I can’t talk about them here, but I’ve got a stack of new ideas for Diggers & Drillers.

I made sure not to miss the unmissable Robert Friedland talk this morning. He promoted his Ivanplats Ltd [TSX: IVP] company. I need to take a closer look at this, but if I got the right end of the stick he has some monumentally big projects, or ‘disruptive’ projects as he called them.

The main one is a platinum, palladium, rhodium, gold, copper, and nickel mine in South Africa that he described as being bigger than the world’s two gold companies – Barrick Gold [NYSE: ABX] and Newmont [NYSE: NEM] – put together. He’s not one to talk things down! Whereas the width of the average platinum seam is a metre, he described this as being 20 metres thick.

He goes on to say it’s the largest precious metals asset globally for a hundred years.

The other two mines in the group are a copper project and a zinc project in the Democratic Republic of Congo. Both sound immense. I don’t know how he does this – find all these ridiculously big assets all the time.

He’s the one that got the Oyu Tolgoi mine up and running (with some help from Rio Tinto) in Mongolia.

He’s also bullish on Sub-Saharan African growth in the next decade. He says it could resemble the China story in terms of urbanisation and industrialisation – leading it to being a source of demand, not just a source of commodities. Ethiopia, Mozambique, Tanzania, Congo, Ghana, Zambia, and Nigeria should all be in the top ten countries for the first half of this decade.

Interesting stuff.

Ethiopia – who’d have guessed that was the third-fastest growing economy in the world? It’s also where China built the new African Union building, and has seen a great deal of foreign direct investment from China. Maybe connected?

And when asked about South Africa or Democratic Republic of Congo as risky places to do business, Friedland said he’d rather be there than Australia. He said, ‘do you trust that redhead?’

On that note, goodbye from Hong Kong.

Dr Alex Cowie
Editor, Diggers & Drillers
Join me on Google+

From the Archives…

Can This Indicator Predict The Dow Jones Next Move?
16-03-2013 – Kris Sayce

Seven Situations to Watch in the Pacific Currency War
15-03-2013 – Dan Denning

Stock Market Warning: Next Week Could be a Blood Bath
14-03-2013 – Murray Dawes

REVEALED: One Opportunity to Escape Your Mortgage
13-03-2013 – Nick Hubble

UK Property: How You Can Buy a House For Less Than 250 Grand
12-03-2013 – Dr. Alex Cowie

By MoneyMorning.com.au

China’s new aspirations have the power to radically change not only the relationship between the US and China, but also between America and rest of the world.

The fact that the dollar is the nominal world reserve currency today is really quite a pretty advantage for the US.

On a recent trip to South Africa they didn’t talk about how many rand an ounce of gold was selling for, they were talking dollars; same for oil. And it goes beyond pricing.

If we need more oil and we don’t have currency to spare, that’s okay. We just print our own money, use it to buy the oil, and the Saudis take it because the dollar’s the reserve currency.

But on the day that the dollar becomes a less useful reserve currency, we have a problem.

For example, we could approach the Saudis and say, ‘we need a tanker full of oil’, and they could say, ‘Well, okay, you can pay us in Chinese yuan.’ But we don’t have any Chinese yuan, so they say, ‘Then we don’t have any oil for you.’

That’s not a problem that the US has dealt with in modern history.

It is, however, a problem other countries deal with now. When Mexico needs to import natural gas and the seller says, ‘that’ll be so many dollars,’ if Mexico says, ‘Oh, we’re all out of foreign exchange,’ they can’t import the gas. It’s that simple, they can’t print US dollars so they’re out of luck.

So anyhow, having your currency be the world’s reserve currency is an enviable position. That’s especially so, when it comes to raw materials like energy, minerals, food, and paying for whatever you import.

The Chinese likely think we have abused the position. Like I said, think like China. We’ve abused the position of our strong dollar to dominate the world, to dominate world trade, to dominate world politics.

They’d like to see the US come down off the hill, and the same thing with the Europeans. But they’re cautious and patient.

China’s Slow Currency Play

So if you’re China right now, you’re trying to break the stranglehold the dollar has over your economy, but you’re sanguine enough to understand that at this point you’re not going to knock the US completely off its pedestal.

And remember, the Chinese don’t want to be No. 1 now, because if you’re No. 1, what’s everybody else in the world trying to do? They’re trying to knock you off. They’re trying to knock you down.

So if you’re China, why do you want to put yourself in that position? No, if you’re China you simply want to compete. Although it sounds strange for a Communist country, domination can wait.

In the short-term then, what I would see happening after 2015 is China using their Treasury holdings (and their gold hoard) as leverage to turn the SDR basket more favourable to China’s economic interest.

Maybe China gets a seat at the table and the yuan is added to the SDR basket? Maybe there’s a component of gold in the basket? Either outcome benefits China’s position. On top of that we could see China try to convert its US Treasury holdings into more of the freshly-balanced SDRs.

Indeed, the Chinese would be stupid not to understand that every year of inflation reduces the overall purchasing power of the $1.2 trillion they hold in US Bonds.

Yeah, it’s a great big monetary shell game. We have these SDRs, and China walks to the table and says, ‘Okay, we have these American Treasuries, so we’re going to post our Treasuries against the IMF, and we will take an equivalent SDR in return.’

And getting back to what I said earlier, it’s very likely that the SDRs are going to have a gold-backed component; whereas right now US Treasury bonds have zero gold-backed component.

And if I’m China, some gold is better than no gold. I’d rather have 100 percent gold-backed currency, but if I can’t get currency backed at 100 percent I’ll take 50 percent, I’ll take 20 percent. I’ll take whatever’s better than zero, which is where China’s current holdings of US Treasuries stand.

This is a dynamic situation, but that’s what I think is going on. And that’s what I think we can look forward to over the next two years – a sea-change in the global monetary system.

The Takeaway

So that’s my big, huge, arm-waving macroeconomic argument for why the next couple of years are going to be very, very good for gold investors and why 2015 is going be spectacularly good for gold investors.

Up until now there has been a slow, more or less steady rise in the price of gold – you know, $1,000, $1,200, $1,500 – and the next couple of years could bring prices of $2,000, $2,500, $3,000 an ounce.

But by 2015 when the SDR revision kicks in and everybody realizes what’s going on, I think we could see gold rally substantially from its current price to north of $2,500. On the high end we could see an order of magnitude change in the price of gold from $2,500 to say $25,000 an ounce!

Right now only few sort of far-out thinkers are talking about this. Hopefully you’re one of them.

Byron King
Contributing Editor, Money Morning

Join Money Morning on Google+

From the Archives…

Can This Indicator Predict The Dow Jones Next Move?
16-03-2013 – Kris Sayce

Seven Situations to Watch in the Pacific Currency War
15-03-2013 – Dan Denning

Stock Market Warning: Next Week Could be a Blood Bath
14-03-2013 – Murray Dawes

REVEALED: One Opportunity to Escape Your Mortgage
13-03-2013 – Nick Hubble

UK Property: How You Can Buy a House For Less Than 250 Grand
12-03-2013 – Dr. Alex Cowie

By www.CentralBankNews.info     Egypt’s central bank raised its key interest rates by 50 basis points, saying inflationary expectations are more harmful to the economy over the medium term despite the risks to the outlook for growth.
    The Central Bank of Egypt (CBE), which last raised rates in November 2011, said it was closely monitoring all economic developments and would not “hesitate to adjust the key CBE rates to ensure price stability over the medium‐term.”
     Egypt’s headline consumer price inflation rose by a monthly 2.5 percent in February – the highest monthly rise since August 2010 – to an annual rate of 8.21 percent due to broad increases in food and non-food prices on the back of changes in the exchange rate and dielsel distribution bottlenecks across the country, the central bank said.
   “While the probability of a rebound in international food prices is less likely in light of recent global developments, the re‐emergence of local supply bottlenecks and distortions in the distribution channels pose upside risks to the inflation outlook,” the CBE said, adding:
    “Despite the downside risks to the GDP outlook, the MPC judges that disanchored inflation expectations are more detrimental to the economy over the medium term. Hence, a rate hike is warranted.”
    The CBE raised its overnight deposit rate by 50 basis points to 9.75 percent, the overnight lending rate to 10.75 percent and the main operation rate to 10.25 percent. The discount rate was raised by 75 basis points to 10.25 percent.

    Egypt’s Gross Domestic Product expanded by 2.2 percent in the fourth quarter from the third quarter for annual growth of 2.2 percent, down from 2.5 percent in the third quarter.
    The central bank said economic growth was suppressed by continuing weakness in the manufacturing sector and investment is low given heightened uncertainty.
    “While the slowdown in economic growth has been limiting upside risks to the inflation outlook, there is a possible build‐up of upward pressures on inflation going forward for the previously mentioned reasons,” the CBE said.

    www.CentralBankNews.info
    

London Gold Market Report
from Ben Traynor
BullionVault
Thursday 21 March 2013, 08:00 EST

THE DOLLAR gold price hovered just below $1610 an ounce Thursday morning, while stocks and commodities fell along with Euro as disappointing economic data was added to news that Cyprus’s banks will remain closed until next Tuesday.

“We forecast the gold price to have dropped to below $1400 by year-end and for it to continue to trend lower next year,” says a note from Societe Generale.

SocGen has cut its average gold price forecast for this year to $1500 an ounce, with the per ounce averages for 2014 and 2015 cut to $1400 and $1300 respectively.

Commerzbank by contrast continues to see record gold prices ahead, but has also cut its 2013 forecast.

“[We] expect the price to rise to only $1800 per troy ounce by year-end [and] we now believe the price target of $2000 per troy ounce we previously forecast for the end of this year will only be reached in the course of next year,” the bank says.

Gold in Sterling meantime edged lower this morning, dipping below £1060 an ounce as the Pound gained against the Dollar following stronger-than-expected UK retail sales data. A day earlier, the US Federal Reserve left interest rates on hold at its latest meeting and confirmed it will continue with $85 billion a month of quantitative easing asset purchases.

Gold in Euros rose towards €1250 an ounce but failed to breach that level before easing back, as the Euro dipped briefly below $1.29.

Cyprus must agree a bailout plan by Monday, the European Central Bank said today, or else the ECB will cut off emergency liquidity funding to the island’s banks.

“Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF program is in place that would ensure the solvency of the concerned banks,” says a statement from the ECB’s Governing Council.

Russian president Dmitry Medvedev meantime has told European Commission officials that any solution to the Cypriot crisis should be found “with the participation of all interested parties, including Russian structures”.

The original EU-IMF bailout proposal included levies on deposits with Cypriot banks, many of which have been made by Russian nationals. Cypriot lawmakers rejected the idea of levies in a parliamentary vote held Tuesday.

“It is now up to the Cypriot authorities to come up with proposals,” Jeroen Dijsselbloem, head of the Eurogroup of single currency finance ministers, told the European Parliament Thursday.

Elsewhere in Europe, the Euro fell against the Dollar this morning after preliminary purchasing managers’ index data indicated economic conditions in the Eurozone have diminished by more than expected this month.

For the Eurozone as a whole, PMIs show contraction in both service and manufacturing sectors. German manufacturing has also declined, the flash PMI indicates, while service sector growth has slowed. The consensus forecast among analysts was for both German measures to rise slightly.

Over in India, the world’s biggest gold buying nation, demand for gold could rise for the first time in three years this year despite the government raising gold import duties to 6%, according to Somasundaram P.R., managing director at the World Gold Council for India.

One of India’s biggest gold lending firms meantime has seen its share price drop by a third this week after it said the fall in the gold price in recent years means the value of collateral may not be sufficient to cover interest owed on all loans.

Silver meantime traded sideways this morning at just below $29 an ounce.

Demand for silver “may be curbed” following the bankruptcy this week of China’s Suntech Power Holdings, the world’s biggest solar panel maker, according to a note from HSBC.

“The solar panel industry is burdened by overcapacity,” HSBC says.

“We estimate silver demand from the solar panel industry represents roughly 10% of silver industrial demand.”

A campaign in Switzerland aimed at preventing the sale of gold by the central bank has received enough signatures to force a referendum.

Politicians in Arizona meantime have proposed legislation that would make gold and silver coins legal tender, Bloomberg reports.

Ben Traynor

BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

By www.CentralBankNews.info Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.

By The Sizemore Letter

In the second half of the interview, Charles Sizemore discusses investing in the frontier markets of Africa, what the passing of Hugo Chavez means for Latin America, the bubble in farmland prices and more on Mike Robertson’s Straight Talk Money:

If you cannot view the embedded media player, please follow this link.

The post Charles Sizemore on Straight Talk Money, Part II appeared first on Sizemore Insights.

By The Sizemore Letter

Listen to Charles Sizemore talk about the Cyprus crisis and what it means for investors on Mike Robertson’s Straight Talk Money:

If you cannot view the embedded media player, please follow this link.

The post Charles Sizemore Discusses the Cyprus Crisis on Straight Talk Money appeared first on Sizemore Insights.

By WallStreetDaily.com

One month ago, almost to the day, I shared this little Wall Street fact of life: The pace of initial public offerings (IPOs) always follows the broader market.

So it should come as no surprise that, as the S&P 500 Index has already charged 9% higher this year, IPO activity is heating up, too.

This week alone, nine companies plan to go public.

Who cares? Well, you should. Because one of those companies happens to be Marin Software (MRIN).

In February, I singled out Marin as a possible “hot IPO,” thanks to its leverage to the mobile advertising boom. (Remember, mobile advertising spending is expected to surge from $3.2 billion last year to $20 billion by 2015.)

However, there was one big caveat: price.

Since overpaying for an IPO never makes investment sense – and Marin hadn’t provided a proposed pricing range yet – we couldn’t determine whether or not it represented a bargain.

But we can now. So let’s get to it before the company begins trading tomorrow.

Survey Says…

Later tonight, underwriters plan to price Marin’s IPO between $11 and $13 per share.

Is that a fair price range?

Normally, we could tell in a flash.

We’d simply pull up everyone’s favorite valuation metric – the trusty price-to-earnings ratio – for each of the company’s competitors and the broad market. Then we’d compare it to the IPO in question, based on its earnings per share.

In Marin’s case, however, it’s not that easy.

As I previously noted, much like every other small-cap, mobile advertising company – including Augme Technologies (AUGT), Millennial Media, Inc. (MM) and Velti Plc (VELT) – Marin isn’t profitable yet.

Given the infancy of the mobile advertising industry, though, we shouldn’t immediately shun these companies because of their lack of profitability as potential investments. I assure you, the growth and, in turn, profits are forthcoming.

Thankfully, we do have two alternative and meaningful valuation proxies that we can use to determine a fair price to pay for Marin.

More specifically, we can evaluate previous investments by venture capital firms and price-to-sales (P/S) ratios for similar companies.

~Valuation Proxy #1: Venture Capital Investments

In November 2012, Marin raised almost $20 million through a private placement with existing stockholders. Its official purchase price? $13.5312 per share.

And since Marin has increased its sales since November, it’s not a stretch to assume that the stock is more valuable as a result.

So, based on previous investments, the proposed range of $11 to $13 per share represents a modest bargain.

Granted, the venture capital firms’ average cost per share is actually lower than $13.53. That’s because they had invested in previous financing rounds (dating as far back as 2010) at lower prices (as low as $5.53 per share).

Nevertheless, if we get a chance to buy in at prices equal to their most recent investment, we should take it.

~Valuation Proxy #2: Price-to-Sales Ratios

The going P/S ratio for a mobile advertising firm is between 2 and 3. But that’s based on an extremely small sample size.

In a broader context, Marin is really a software-as-a-service (SaaS) company. And if we include those companies in our analysis – including salesforce.com (CRM), Guidewire (GWRE) and Workday (WDAY) – the range of P/S ratios checks in at 8 on the low end and 36 on the high end.

Now, I’m always a bit conservative when it comes to valuing an IPO.

Accordingly, let’s use a P/S ratio range of 8 to 10 for Marin. Doing so values shares at about $15.80 to $19.75. So, again, the proposed pricing range of $11 to $13 appears to be a bargain.

Granted, underwriters might be underpricing the deal to produce a one-day pop. They’ve been known to stack the deck, so to speak, to make their track record appear more impressive.

But that’s precisely why we’re completing our valuation analysis in advance of the stock’s debut. It’s the only way to remain rational with our purchasing decisions.

You see, if the IPO does, indeed, pop out of the gates, we know at what point the price becomes prohibitive.

As for most other investors, who usually don’t hear about an IPO until it begins trading – well, they’re left to their own devices (i.e. – human nature).

When they see a dramatic price run-up for an IPO, they often buy in, thinking it’s a momentum play that should be purchased at any price. And more often than not, such an investment “strategy” yields losses, not profits.

Bottom line: Based on previous venture capital investments, the explosive growth on the horizon for mobile advertising firms and prevailing price-to-sales ratios, Marin is a compelling investment for under $20 per share.

Ahead of the tape,

Louis Basenese

Article By WallStreetDaily.com

Original Article: Is This IPO Hopeful the Market’s Next Big Gainer?

By MoneyMorning.com.au

So did you heed my market warning from last week?

We’re only half way through the week and the stock market has fallen 3.5% from Friday’s close. This is exactly the set-up I discussed in my recent presentation. You can check it out here.

But as I said last week:

‘There comes a time in trading when you need to back yourself and stand firm in a view.

‘That moment has arrived for me.

‘After what has seemed like an eternity the ASX 200 has now done the work necessary and set itself up beautifully to catch many investors and traders with their pants down.

‘The long overdue correction in prices is very close.’

It’s still early days of course and we’ll still see buying pressure from the market in the short term. But the fact is the price action we saw early this week in the stock market is exactly what I needed to see to increase my conviction levels that the correction is on the way.

The catalyst for this was the news in Cyprus that the man in the street is now on the hook for the mistakes made by their banking overlords. There has been a mountain of commentary about this issue over the last few days and not much of it has been good. My favourite comment has been that Europe has ‘bazooka’d itself in the foot’.

If they’re pilfering money from people’s bank accounts to cover their losses it shows that their back really is against the wall.

Governments Trampling All Over The Property Rights

Personal property is the very cornerstone of a free society. It appears that we’re entering a new age where personal property is no longer respected by governments when it gets in the way of their plans.

John Adams stated it this way in the Massachusetts Declaration of Rights:

‘All men are born free and independent, and have certain natural, essential, and unalienable rights, among which may be reckoned the right of enjoying and defending their lives and liberties; that of acquiring, possessing, and protecting property; in fine, that of seeking and obtaining their safety and happiness.’

And as Thomas Jefferson said:

‘I believe…that a right to property is founded in our natural wants, in the means with which we are endowed to satisfy these wants, and the right to what we acquire by those means without violating the similar rights of other sensible beings; that no one has a right to obstruct another exercising his faculties innocently for the relief of sensibilities made a part of his nature…’

Outright theft of another’s private property in this way by a government is turning hundreds of years of progress of our civilisation on its head. That may sound like a big claim but I stand by it. This news is a huge game changer.

If I was observing this situation from Spain or Italy I would start to seriously consider my options going forward. We now know that the ‘deposit guarantee’ is no longer sacrosanct. The rule of law is no longer respected and the ‘troika’ (The EU, IMF and ECB) can’t be trusted.

Initial reports were that up to 40% of the savings of depositors was demanded. My God. Imagine waking up in Spain one morning and finding out that 40% of your life savings had been stolen to cover the losses of the banks. Now imagine it happening after you had already been warned by the events in Cyprus.

It will be very interesting watching what happens once the banks reopen in Cyprus. Apparently nearby countries were on alert to send across Euros if necessary. The ECB has said it will back the banking system with liquidity. You had better hope so because there will be a lot of angry Russian oligarchs filling out withdrawal slips for billions of Euros. What a farce.

Now to the Australian Stock Market…

The Cyprus issue is not the only thing that has got the market spooked. BHP and RIO plunged yesterday morning with news out of the Hong Kong Credit Suisse Asian Investors conference that things in China aren’t that rosy. Chinese steel companies have rising inventories and the iron ore price has plummeted over the past few weeks with further downside expected.

RIO has fallen more than 20% in a little over a month. BHP is down about 15% in that time and Fortescue has plummeted 32%. I’m actually amazed the ASX 200 is still so high in the face of these figures. The banks are like Atlas carrying the world on its shoulders. If Atlas shrugs the stock market will fall hard and fast.

It’s interesting to note that the worst performing sectors over the past few days have been the Financial, IT and Health sectors. They are the three strongest performing sectors over the last few months so it looks like we’re starting to see some profit taking and long liquidation. We’re still in the very early stages of that process.

So, what next?

The very short term could see some buying pressure emerge once again because we’ve sold off below my initial target of 4975 that I told you about last week.

Click here to enlarge

You can see from the above chart that the intra-day price action in the ASX 200 is creating a distribution between 4975 and 5106 (the solid blue lines) with a Point of Control around 5040.

A false break of the lows at 4975 should see some buying return but my guess would be that there will be some stiff resistance at the point of control at 5040.

If the Australian Stock Market can’t make it back to the Point of Control and instead cracks beneath the lows made yesterday of 4937 then we may be about to witness a fall of hundreds of points in a matter of days. I explain more about that here…

Murray Dawes
Editor, Slipstream Trader

Join me on Google Plus

From the Port Phillip Publishing Library

Special Report: Australia’s Energy Stock BLOWOUT

Daily Reckoning: The Mining Shuffle

Money Morning: Just Like Cyprus: How the Australian Government Turned on its Citizens

Pursuit of Happiness: The Bright Side of the Cypriot Banking Crisis

From the Archives…

Can This Indicator Predict The Dow Jones Next Move?
16-03-2013 – Kris Sayce

Seven Situations to Watch in the Pacific Currency War
15-03-2013 – Dan Denning

Stock Market Warning: Next Week Could be a Blood Bath
14-03-2013 – Murray Dawes

REVEALED: One Opportunity to Escape Your Mortgage
13-03-2013 – Nick Hubble

UK Property: How You Can Buy a House For Less Than 250 Grand
12-03-2013 – Dr. Alex Cowie