Month: July 2013

By MoneyMorning.com.au

Imagine a world where your medical treatment is 100% unique. Every diagnosis, treatment, drug and dietary change is tailored to you and you alone. Every treatment works in a predictable way, with a predictable timeframe and with predictable and minimised side effects.

In other words, imagine not worrying when you walk into the hospital. Instead of feeling like a car on an assembly line, you’ll be treated like the unique human being you are. Instead of seeing a specialist in a field of medicine, the information in your genome can turn any GP into a specialist in the field of ‘you’.

They’ll know what you’re at risk of and what symptoms to look for. They’ll know precisely what’s wrong with you instead of matching up your symptoms to a disease. They’ll know how to treat you, not the average human being.

Changing medicine in this way would fundamentally alter your quality of life in retirement.
It makes sense to individualise medicine. Your body is unique, after all. But to provide personalised medicine would surely require absurd amounts of tests, knowledge and expertise. Can you imagine the cost?

Well, thanks to the science of genomics, the cost is rapidly falling. You won’t believe how much. And you may only have to take one test…ever.

How Medicine is Broken

But what’s wrong with medicine now? A lot. Right now, patients tend to receive a standardised treatment.

You can see the problem – everyone is different, but our treatments are the same. Drugs often only work in certain people. They actually end up harming others. But it is often possible to predict for whom a drug will work, and whether it will have side effects.

For example, a commonly used drug called Carbamazepine is prescribed for a variety of neurological conditions. It has a six in 10,000 chance of a potentially fatal side effect. But we can identify who that 6 in 10,000 are using genetics, by looking for the tell tale genetic pattern of ‘Stevens Johnson syndrome’.

In Taiwan, where the probability of the syndrome is much higher for racial reasons, the genetic test is compulsory before you can take the drug.

Taiwan is showing how genomics can be used to prevent devastating side effects, and literally save lives. But the power of genomics is far greater. You see, despite the Hippocratic Oath doctors take to ‘do no harm’, they often unconsciously do more harm than good.

For example, a number of studies have shown that the number of false positive PSA tests (for prostate cancer) is so high that the damage done from widespread testing outweighs the benefits.

The Cost of Being Healthy in Retirement Research has shown a male retiree has a 50-50 chance of incurring more than $109,000 of medical expenditure in retirement.

Women face a 50% higher cost at the same level of probability. On another estimate, the
average 65 year old couple will need $220,000 to pay for their life’s healthcare. Understanding your genome could help you cut these costs dramatically by avoiding diseases you’re at risk of, adjusting treatments and predicting debilitating side effects.

The same applies to mammography testing for breast cancer. The pain, cost, emotional hardship, surgical complications and anxiety of false positives is so large that widespread testing should be stopped.

I know this goes against conventional wisdom, but the researchers aren’t saying there should be no testing at all. Instead, targeted testing based on genetics and family history should be used. If you sequence your genome and the risk of breast or prostate cancer is elevated, then you should get tested regularly.

Of course, pharmaceutical companies and doctors won’t tell you this. There’s too much profit involved. The world’s most successful drug class based on revenue (statins) only works properly in one to two people in 100 according to Eric Topol of the Scripps Research Institute.

In short, something is seriously wrong in the world of medicine…

Fixing Medicine in Your Favour

The solution to problems like these is personalised medicine. And genetics is a key part of that.

Knowing your patient so well that you can personalise their treatment is the Holy Grail for
doctors. That’s because rather than just hoping you’ll stay healthy or react well to drugs, gene sequencing looks at the real you. It paints a picture, which doctors can refer to for the rest of your life.

Apart from improving medicine, saving lives and preventing discomfort, genomics could help save vast amounts of money. If people stopped taking drugs that don’t work for them, or which create side effects worse than the disease, that would save enormous amounts of wasted drugs and treatments.

Of course, there is also the opposite risk. If you’re a hypochondriac, you might choose to interpret your sequenced genome in a way that does more harm than good. If you think you might panic at the slightest sign you’re likely to get a disease, don’t get the test done in the first place. It’s not for you.

Scientists are now able to sequence, or map, your genome. Your genome is what makes you
unique. It’s what sets each of us apart.

Hidden inside your cells are strands of DNA. And inside your DNA are your genes. They are the combinations of four types of ‘bases’. The sequences of the bases are what spell out your genome and determine your characteristics. Your appearance, immune system, allergies, and much more are determined by your genome.

Certain patterns in your genome give scientists information about you. They can identify diseases you’re at risk of, diseases you’re a ‘silent carrier’ of, your physical traits and much more.

Yes, this leads to all sorts of moral, ethical and practical questions. How much information about your future health do you really want to know? How much of it will be accurate? Will your worrying exceed your peace of mind? You are perfectly right to be worried about the implications.

But there are also enormous benefits.

Nick Hubble+
Editor, The Money for Life Letter

Ed Note: If you’re interested in learning more about getting your genome sequenced, including how to do it, you can check out the latest issue of the The Money for Life Letter by clicking here…

From the Archives…

Why Invest ‘Hard’ When You Can Invest ‘Easy’?
19-07-2013 – Kris Sayce

Read This Before You Buy Another Stock or Bond…
18-07-2013 – Murray Dawes

Could Uranium be the Best Investment in 2013?
17-07-2013 – Dr Alex Cowie

Asteroid Mining and the Commercialisation of Space
16-07-2013 – Sam Volkering

Why the Australian Share Market is Heading Even Higher
15-07-2013 – Kris Sayce

By www.CentralBankNews.info

By www.CentralBankNews.info     Nigeria’s central bank maintained its Monetary Policy Rate (MPR) at 12.0 percent, as expected, but warned of the key risks from rising government deficits, pressure on the exchange rate from excess liquidity in the banking system and a possible reversal of capital flows.
    The Central Bank of Nigeria (CBN), which has held rates steady since October 2011, said its Monetary Policy Committee had voted by 9-1 to maintain the policy rate but also agreed to introduce a 50 percent Cash Reserve Requirement on public sector deposits, i.e. deposits from federal, state and local governments and all ministries, department and agencies (MDAs).
    The central bank said it was satisfied with the recent stable macroeconomic conditions and its ability to “defend the currency in the face of capital flow reversal and significant revenue attrition has stemmed from the depreciation of the naira.”
    While the inflation rate is expected to remain within single digits due over the next six months due to base effects and tight monetary policy, the central bank said government spending is likely to lead to increased borrowing and warned about liquidity in the banking system.

   “The Committee observed the build-up in excess liquidity in the banking system, and expressed concern over the rising cost of liquidity management as well as the sluggish growth in private sector credit, which was traced to DMB’s (deposit money banks) appetite for government securities,” the CBN said, adding:
    “The situation is made more serious by the perverse incentive structure under which banks source huge amounts of public sector deposits and lend same to the government (through securities) and the CBN (via OMO bills) at high rates of interest.”
    Nigeria’s inflation rate eased to 8.4 percent in June from 9 percent in May, below the central bank’s target of 10.0 percent.
    The Nigerian naira has dropped just over 3 percent against the U.S. dollar this year, trading at 161.8 to the U.S. dollar today and the central bank said its external reserves had risen by 9.49 percent to  $47.99 billion from end-2012, cover for around 11 months of imports.
    Nigeria’s economy is estimated by the statistics office to have expanded by an annual rate of 6.72 percent in the second quarter, up from 6.56 percent in the first quarter, and overall Gross Domestic Product growth is estimated at 6.91 percent for fiscal 2013, up from 6.58 percent in 2012.
    The contribution of oil to GDP is continuing to decline due to sustained oil theft, which has led to lower output due at a time of uncertain international oil market, weak infrastructure and downside risks due to the discovery of shale oil and the emergence of other African oil exporters that are now competing for Nigeria’s traditional oil market.

    www.CentralBankNews.info
   
   

Source: Brian Sylvester of The Metals Report (7/23/13)

http://www.theaureport.com/pub/na/15460

After a spike in flake graphite in 2011, have prices finally reached bottom? Ron Struthers, the publisher and editor of Struthers’ Resource Stock Report, believes so. In this interview with The Metals Report, Struthers talks about how market psychology and fundamentals may play out in the graphite and rare earths spaces as new mines inch toward production.

The Metals Report: In 2011, there was a spike in flake graphite prices, a proliferation of publicly traded graphite equities and some speculation by investors. Since then, graphite prices have fallen and most investors lost money. How do graphite investors make money now?

Ron Struthers: If you’ve already bought in, the best thing is to hold right now. Graphite equities have probably hit a bottom. Going forward, investors should stick with companies that have good odds of getting to production in the near term. It’s a very small market, so if a few new mines come on, production can make a difference.

TMR: Do you believe the price of flake graphite has bottomed?

RS: I think so. But it’s a different market compared to other mining sectors in that the price is mainly set by negotiated contract. There is no futures exchange. In 2011, when prices were rising, buyers, who for the most part are end users, got scared. They thought prices were going to climb higher still, so they bought more to lock in at a relatively lower price and keep ample supplies for their manufacturing requirements. Of course, because they were buying more, it drove demand—and the price—higher, until the market got to a point where buying slowed as inventories were built higher.

Then the exact opposite happens. Buyers become leery and prices start to drop off. The buyers say, “Well, I have a year’s supply of this stuff because I bought it on the way up. I’m just going to sit back now.” The demand drop-off in 2012 wasn’t about less graphite being used. It was more about a change in the market psychology. The fundamentals haven’t changed. There have been no new mines come on. In fact, supply probably has come down a bit as China has consolidated some of its industry. At this point, prices have been stable for a few months. That’s an indication that the market is at equilibrium.

TMR: What price range do you expect flake graphite to trade at for the rest of this year and through 2014?

RS: It will probably trade within a couple hundred dollars of the current price—$1,200–1,600—but more than likely, it won’t fluctuate that much. There will be more of an upward bias next year if we get through this change in the market psychology and the fundamentals come back into focus. Demand is still growing from new areas like electric cars. And although a lot of companies are advancing their projects, we still haven’t seen a new significant mine, especially in North America, where new mines are still a few years from production.

TMR: Most gold and silver companies tell specifics about how they will make money and grow production in company presentations. But graphite companies don’t really talk so much about the specifics of their project or mine. Do they believe that investors don’t understand this space yet?

RS: It’s early on in the industry for public graphite companies. We don’t have a good handful of pure graphite companies in production that we can point to for historical information on costs. We have the preliminary economic assessments (PEAs) from some of the explorers, but unlike gold and silver, we don’t have any pure public producers in North America to use as comparables. There are just two producing mines in North America and they are private.

TMR: What don’t investors understand about the graphite space?

RS: The main thing is understanding the percentage of carbon content in the deposit, the flake size distribution and purity on recovery. An ounce of gold is an ounce of gold—we know what the price is. It’s simple. But graphite value involves more variables. Recovery rates are very important in evaluating a graphite project. Some gold mines can operate with 60–80% recoveries and produce valuable byproducts that refiners can handle like silver and copper, but graphite needs 94% purity on recovery or better to get the proper pricing, and then that pricing varies by flake size—the larger the flake, the better the price.

TMR: What about production costs? An average ton of flake graphite is going for about $1,500. Are there companies that can profitably produce graphite at that price?

RS: Northern Graphite Corporation (NGC:TSX.V; NGPHF:OTCQX) is the most advanced. It can make money, as most of its graphite is large and jumbo flake. There will be others, too. Graphite is actually fairly easy to mine. The costs aren’t much compared to other mining projects, it’s all about the flake size distribution and purity.

TMR: Northern Graphite estimates that it is going to cost about $103 million ($103M) to build its flagship project Bissett Creek. How much of that money does Northern Graphite have?

RS: Northern Graphite has $7M in cash and a $17.5M financing from Caterpillar for equipment. So it’s part of the way there, but realistically the company needs the mine permit first to secure the debt portion of the financing. It can’t put the cart before the horse, so to speak.

TMR: What’s the earliest this mine could be in production?

RS: It is waiting on a final permit and will need a final round of financing. It could be into production in H2/14 at the earliest.

TMR: There is some speculation that TIMCAL Graphite & Carbon, a division of Imerys (NK:PA), is probably going to need a new mine before long when the Lac-des-Îles mine comes to the end of its life cycle. Could TIMCAL buy an emerging graphite asset in Ontario or Quebec?

RS: It’s interesting that you mention TIMCAL as they just temporarily shut down production, so that will help tighten the supply side of the market. It would make a lot of sense to me. Producers in gold and other sectors where the market has come down are taking advantage of low prices. It wouldn’t surprise me at all to see the same thing in graphite.

TMR: Which company do you think will be the first one to ship flake graphite?

RS: Northern Graphite is fairly close and should be the first of its peers to ship graphite. Focus Graphite Inc. (FMS:TSX.V) has a project with a PEA. Focus is a little different than most projects. It is the only one directly invested in the graphene market with a private company called Grafoid Inc., which is devoted to developing a standard for economically scalable, affordable graphene. It’s unique in that it is both a play on graphite and graphene. Focus is well financed with $17M and over $5M in Grafoid.

TMR: Do you believe that it can commercially produce graphene profitably?

RS: It’s been demonstrated on small bench-scale tests that it can be done. They’re getting refining purity levels up to 99.9% using natural graphite, which is the level needed for graphene. They’re practically there now. However, we need to see this on a commercial scale to know for sure. There’s been bench-scale testing from a number of projects and from renowned metallurgy companies. It’s something we’ll see down the road.

TMR: How is the grade at Focus’ Lac Knife graphite project?

RS: That’s another advantage that it has. It does have a higher grade than most projects, around 15–17%, which goes quite a way in reducing mining costs. Its graphite occurs in pod-like formations, so there might be a little more overburden in the removal process, but the grade definitely makes up for that and more. Focus has the potential to be the lowest-cost producer based on its recent PEA.

TMR: Are there any other graphite stories you’re following?

RS: Valterra Resource Corp. (VQA:TSX.V) has a project in Bobcaygeon, Ontario, with high grades and from the initial sampling, about 24–28% carbon. In Valterra’s metallurgy testing, purity levels ran as high as 99.96%, so there’s graphene potential in this project.

Valterra approached its project differently than other companies might have. It took some bulk samples right off the bat and found it had the high-purity, high-grade graphite. That made it a very interesting story. Now it has to prove it has enough graphite there for a mine.

It’s at the point of mapping out the zones, and then it will be drill testing to see if it can put some tonnage together. It’s an early-stage stock with a very low price, and a lot of blue sky in front of it.

Also Alabama Graphite Co. (ALP:CNSX) just announced its first NI 43-101 resource of 38.2 million tons at 2.6% carbon. The deposit is on surface and the company should get mine permitting very quickly in Alabama. If the metallurgy and feasibility studies come back positive, Alabama Graphite could be among the first to production. The company just completed a $335,000 financing at $0.15 above the market price and is well subscribed by management, which is a very good sign of confidence in the project.

TMR: Is there enough room in the graphite space for multiple players, after the first project makes it to production?

RS: There is room for a few new mines to come in, probably enough for three and four, depending on how much they produce. But they’re going to trickle in over the next several years; it’s not going to be a flood onto the market anytime soon.

TMR: Could there be a consolidation phase in the graphite space?

RS: Quite a few juniors have come into the market, but quite a number will fade away because it’s difficult to raise money right now and the nature of exploration means that most projects will not be economically viable.

TMR: What’s your near- to medium-term outlook for the rare earth element (REE) space?

RS: There’s potential here. A lot of the REE prices haven’t gone down nearly as much as other minerals. There’s some good stories, like Pacific Wildcat Resources Corp. (PAW:TSX.V).

TMR: That project is located in Kenya, East Africa. Are there jurisdictional advantages there?

RS: Kenya is right on the coast. There is good infrastructure near Pacific Wildcat’s project, including hydropower, paved highway and ports. It’s one of the more advanced countries in Africa. It has expanded strongly in tourism, telecommunications and its traditional tea market. It is a liberal market with minimum government involvement and British-based common and mining law.

TMR: Does Pacific Wildcat’s project lean more toward the heavy rare earth elements (HREEs)?

RS: It has a good mixture of HREEs and light rare earth elements. At about 5%, it is a high-grade deposit. Its basket of REEs is valued at around $35–45/kilogram (kg). It also has a 100 million tonne niobium deposit that’s quite advanced.

TMR: Why should investors be interested in niobium?

RS: It’s not a well-known material, but it’s a strategic element and has been used a long time in the steel industry for strength in different alloys and super alloys. Some of these super alloys are used in jet engines and space programs. There are only a few producing mines in the world, as it is very rare to find niobium in economic concentrations. At $40/Kg, it provides a very attractive potential return on investment for miners. It’s a fairly stable market price wise.

TMR: What got you interested in Pacific Wildcat?

RS: It has a lot going for it. It has a large niobium project with a high-grade zone that could be a cash cow. It has a smaller tantalum project that’s already proven out. It has a processing plant. It just needs a little bit more money to finish some spiral concentrators and can go into production this year. It has a world-class REE project that could have 5% grade or better. Recent assays show 105 meters (105m) at 6.97%, 105m at 7.17% and 100m at 6.18%, all starting from surface.

TMR: What about management?

RS: It is very strong in that regard. Management has a lot of experience in putting mines into production. CEO Darren Townsend is an engineer and previously worked as general manager of Sons of Gwalia, which operated the world’s largest tantulum mine. Terry Lyons, who is the chairman, has more than 30 years’ experience. He was a past chairman of Northgate Minerals Corp. (NGX:TSX, NGX:NYSE.MKT). The company has management with experience in the tantalum industry. It also has some directors with experience in Africa.

TMR: What is tantalum used for?

RS: Tantalum is used in alloys but mostly in capacitors for electronics like computers and phones. It is highly corrosion resistant. The tantalum price has moved up quite a bit, from about $80/pound (lb) last year to $130/lb currently. It’s one of the few metals or minerals that has seen an increase in price this year.

TMR: Why should investors be interested in this space overall right now?

RS: A lot these materials are an important part of our future. Technology we’re developing requires more graphite and REEs. If you can find companies that can put these into production soon, you’ll see strong cash-flow, earnings and even dividends.

TMR: Dividends in the REE space? That’s interesting.

RS: I’m talking down the road, after companies outside of China go into production. A number of the graphite stocks—Focus, Northern Graphite, Alabama, Valterra—have come down in price. So has Pacific Wildcat. Any of those would be a good place for investors in the graphite or REE spaces.

TMR: Thanks Ron.

Ron Struthers founded Struthers’ Resource Stock Report almost 20 years ago. The report covers senior and junior companies with ample trading liquidity. Since 2000, $1,000 invested in Struthers’ Model Portfolio ended 2012 at $9,251. Struthers Newsletter Stocks went from $1,000 to $20,934. Struther’s Millennium Index, which started in 2003, began at $1,000 and was worth $4,133 at the end of 2012.

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DISCLOSURE:

1) Brian Sylvester conducted this interview for The Metals Report and provides services to The Metals Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Metals Report: Northern Graphite Corporation. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Ron Struthers: I or my family own shares of the following companies mentioned in this interview:Northern Graphite, Focus Metals, Valterra Resources, Alabama Graphite, Pacific Wildcat. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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By The Sizemore Letter

Income investors had a little scare in May and June.  Bond prices took a tumble and dragged down assets that have come to be viewed as bond substitutes—including popular dividend-paying stocks, MLPs and REITs.

Now that the dust has settled and the income markets have regained some semblance of normalcy, let’s take a step back and review the case for income stocks.  With the Fed’s quantitative easing eventually coming to an end and with bond yields likely to rise in the years ahead, does it still make sense to look to the stock market for income?  Or might investors be better off buying and rolling over a bond ladder to meet their income needs?

Let’s take a look at the numbers.  Consider the options you had as an investor ten years ago.  In 2003, the 10-year Treasury yielded 3.97%.  We’ll be generous and say 4% to keep the math simple.  A million-dollar portfolio invested in Treasuries would have paid out an income of $40,000 in the year you bought it…and ten years later, it still would have paid you $40,000 per year on your original purchase price. (Math purists will point out that the yield to maturity calculation is a little more complicated than that, but it’s close enough for our purposes here.  We’ll assume you bought the bonds at par and that capital gains are a moot point.)

Over the ten year life of the investment, you would have received $40,000 per year.  Of course, $40,000 went a lot further in 2003 than it does in 2013, but we’ll get to that a little later.

Now, let’s do the same math on one of my favorite REITs—Realty Income ($O).

I chose Realty Income for a very specific set of reasons.  First, in 2003, its dividend yield—at 3.5%—was close enough to the 10-year Treasury yield to make these two viable competitors for the would-be income investor’s portfolio.  Secondly, as a low-risk, triple-net retail REIT, Realty Income is a prime example of a stock that has come to be viewed as a “bond substitute” by income investors.

So, how did Realty Income stack up?

The math here is a little more detailed, but I’ll do my best to keep it simple.  A million-dollar portfolio invested in Realty Income at the beginning of 2003 would have bought you 29,516 shares paying $1.17 per share in annualized dividends.  That works out to $34,534 in income in the first year—or about $5,500 less than the 10-year Treasury.

But this is where it gets fun.  Unlike the bond, Realty Income actually raised its payout every year.  By 2013, those 29,516 shares were paying out $2.18 per share in annual dividends.  That works out to $64,345 in annual income—or $24,345 more than the interest from the bond.

In 2013, Realty Income sported a dividend yield of 4.8%, which isn’t shabby.  But your yield based on your purchase price would have been a much more impressive 6.45%.  And remember, we haven’t said a word about capital gains; we’re focusing purely on the cash payout, which is ultimately what pays your bills in retirement.

Stepping away from REITs, let’s take a look at two widely-held blue chips that have more or less tracked the market over the past ten years—Johnson & Johnson ($JNJ) and Wal-Mart ($WMT).  I included both of these names for one critical reason—both paid comparably low dividends back in 2003.  Yet despite paying a modest yield at the time, both had been serial dividend raisers for a long time—and still are.  Their stock prices have had wild swings over the years, but their dividends have been a source of rock-solid stability.

In 2003, Johnson & Johnson and Wal-Mart yielded 1.5% and 0.65% in dividends, respectively.  A million dollars invested in each would have paid out $15,296 and $6,538.  That stacks up pretty poorly in comparison to the $40,000 you could have received in bond interest by investing in Treasuries.

But let’s fast forward ten years.  Those original million-dollar investments in Johnson & Johnson and Wal-Mart would be paying you $49,244 and $34,144, respectively.  Wal-Mart’s total cash payout is still a little lower than the payout from the Treasury note, though it rose by more than a factor of 5—and will likely keep rising at a blistering pace for the foreseeable future.   And again, this says nothing about capital gains—or about the reinvestment of dividends, which would have boosted the number of shares you owned and thus your ultimate payout.

What lessons can we learn from this?

Dividend growth matters far more than current yield.  When building an income portfolio, accept a lower payout today in the interest of generating a far bigger payout tomorrow.  As in so many other areas of investing, delayed gratification has its rewards.

I’ll leave you with one final point on inflation and taxes.  The first is obvious.  Prices rise over time, and the only way you can avoid getting progressively poorer in retirement is to have an income stream that at least keeps pace with inflation.

Finally, depending on how you are invested (IRA vs. taxable account), taxes will play a role in your “take home” income.  If investing in a taxable account, you will pay 15-20% on your dividend income, depending on your income bracket and whether the dividends are “qualified.”  Bond interest is taxed as ordinary income, meaning you could be paying a substantially higher rate, depending on your tax bracket.

Disclosures: Sizemore Capital is long O, WMT, and JNJ.

SUBSCRIBE to Sizemore Insights via e-mail today.

By The Sizemore Letter

The votes have been counted.  Japan’s Liberal Democrats—the party of Prime Minister Shinzo Abe—won a landslide victory over the weekend, securing control of both houses of parliament.

The implications here are huge.  Abe is as close as you can get in modern Japan to a militant nationalist, and the win will only encourage him to escalate his war of words with China.  Abe is pushing for a re-write of Japan’s constitution that would scrap some of the pacifist language written in by the United States after Japan’s surrender in World War II.

All of that is fine and good, but the question on most investors’s minds is far more focused: what does this mean for Abenomics and the “Abe Trade” of going long Japanese equities and short the yen?

Japanese stocks were mostly flat after the news, suggesting that there were no real surprises.

Looking over the past few months, we get a more interesting story.  The Japanese Nikkei Index (orange line above) took a tumble in May and early June, falling into bear market territory.  Yet taking a lot of investors by surprise, the Nikkei has since rallied and gained back most of its losses.

The yen (green line), which has moved the opposite direction, rallied over the period before giving most of the gains back.

So, it would appear that the Abe Trade is back on…at least for the time being.

If you are a short-term trader or trend follower, then there may be a little money left to be made in this trade.  By all means, go for it. But be careful, and make sure you have some kind of risk management in place.

If you are a longer-term investor or if you are less-inclined to monitor your positions closely, stay out of Japan.  Being long Japan is comparable to picking up nickels in front of the proverbial steam roller.  If you linger too long, you will get crushed.

While I try to stay objective and avoid looking at the markets through biased eyes, I admit fully that I have become something of a Japan permabear.  When I look at the country’s macro environment, I do not see any set of circumstances whereby this doesn’t end poorly.  At 240% of GDP, Japan’s sovereign debts are the highest in the developed world, and by a wide margin.  Its population is aging and shrinking (see Jeff Reeves’ recent article about the Japanese boom in adult diaper sales) meaning its tax base to support its debts gets smaller every year.  And it adds to this mountain of debt with a budget deficit of nearly 10% of GDP.

All it would take for Japan to descend into a financial meltdown would be for its bond yields to rise by a couple percentage points…which is a virtual inevitability given the country’s borrowing needs.

And topping it off, after their torrid run, Japanese shares are no longer cheap.  The Nikkei trades for 16 times expected 2014 earnings.

When will Japan’s day of reckoning come?  Frankly, I have no idea.  It will come when investor sentiment shifts and investors suddenly perceive the risk that has been there all along.  It could happen tomorrow…or it could happen in a few years’ time.  But happen it will.

If you want to continue to play the Abe trade, the second half—shorting the yen—is the less risky option.  If I am correct about Japan eventually blowing up, then the yen will fall to zero…or close to it.

If you decide to play the first half—going long Japanese equities—do so with the mentality of a short-term trader and use proper risk management.  Japan is not a long-term buy because Japan has no long-term future.  If you need a reminder, print off Jeff’s article on Japanese adult diapers and tape it to your wall.

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By www.CentralBankNews.info     Hungary’s central bank cut its base rate for the 12th time in a row to help boost economic activity and inflation but added that it may change the “pace or extent of policy easing over the coming months” due to “the significant reductions in interest rates so far and the volatile conditions in financial markets.”
    The National Bank of Hungary, which has now cut rates by 175 basis points this year alone, said inflationary pressures are likely to remain moderate in the medium term due to the “significant degree of spare capacity in the Hungarian economy” and data confirm that weak demand has exerted a strong disinflationary impact as firms have limited ability to raise their prices.
    A 25 basis point cut in the bank’s base rate to 4.0 percent should help ensure that inflation rises toward’s the central bank’s 3.0 percent target, but the increased volatility in financial markets and the uncertain outlook for global growth pose a risk and this “calls for maintaining a cautious approach to policy,” the bank said, adding:
    “A sustained and marked shift in perceptions of the risks associated with the economy may influence the room for manoeuvre in monetary policy,” the central bank said, signaling that it is getting closer to a more neutral policy stance and the aggressive pace of easing is drawing to a close.
    Since August last year, the bank has cut its base rate by 300 basis points but it is now becoming more cautious about the effect that further rate cuts may have on capital flows and the forint currency.
    In June the central bank also noted that its room for manoeuvre was affected by the shift in market’s perception of risk but it added that it would cut rates as long as the outlook for inflation and the real economy justified such a move. The reference to further rate cuts was omitted in today’s statement.
    Like most other emerging market currencies, Hungary’s forint weakened in May as major investors started to withdraw funds from riskier markets, with the forint falling 4 percent against the euro during the month. But by early June the forint bounced back and is down only 1.6 percent against the euro since the start of this year, quoted at 295.8 to the euro today versus 291 in early January.
    The central bank said there had not been any significant sell-off in domestic assets during the past month and domestic indicators of risk had declined despite uncertain global financial markets.
    Hungary’s inflation rate has been pushed down due to weak demand and the central bank expects underlying inflation to remain subdued in the medium term and the risks are moderate.
    Inflation in June was 1.9 percent, slightly up from 1.8 percent the previous month. The bank said the impact of regulatory price measures from 2002 to 2009 on consumer prices had halved after 2010, indicating a change in the approach of economic policy to inflation.
    “Consequently, inflation in 2013 is expected to fall back to around 3 percent even excluding the effect of the reduction in utilities prices,” the bank said.
    Hungary’s economy, which has been in a deep recession, is showing signs of improvement and the bank said growth is likely to resume this year though it will remain weak.
     In the first quarter of this year, Hungary’s Gross Domestic Product expanded by 0.7 percent from the previous quarter – the strongest quarterly growth rate in eight quarters. However, on an annual basis, the economy contracted by 0.9 percent, the firth quarter with a negative growth rate.

    www.CentralBankNews.info

London Gold Market Report
from Adrian Ash
BullionVault
Tuesday, 23 July 08:55 EST

The PRICE OF GOLD eased back to $1330 per ounce Tuesday morning in London, dropping 0.7% from yesterday’s 5-week highs as commodities slipped with major government bond prices.

 Asian stock markets rose as the Japanese Yen edged lower. European stocks and US equity futures crept 0.2% higher.

 “We believe there is a strong element of short covering behind the recent buying in gold,” says one broker’s note, pointing to the record-large number of bearish bets held by speculative traders in gold futures.

 “Precious metals are looking heavy,” says Standard Bank’s commodity team in London, saying that gold prices are “sitting on support at $1330.”

 Gold demand in China – the world’s No.2 consumer nation – eased off Tuesday, with premiums for 0.995 fine gold bars traded in Shanghai slipping to $20 per ounce above benchmark London prices, down from $37 a fortnight ago.

Yesterday saw new gold bullion import rules in India, with the Reserve Bank demanding that importers set aside one-fifth of new shipments for re-export.

 India’s Rupee rallied from record lows, widely blamed on the country’s widening current account deficit.

 Gold imports will fall nearly two-thirds in July-December from 2012, reckons the All India Gems & Jewellery Trade Federation. But “this is an overly pessimistic appraisal,” says Commerzbank, “probably aimed at encouraging the Indian central bank and government to loosen the restrictions.”

 The central bank of world No.4 gold consumer Turkey meantime raised interest rates on overnight loans by 0.25% on Tuesday.

 The Turkish Lira rose from its weakest level to the US Dollar since the revaluation of 2005 knocked 6 zeroes from the currency.

 Rising 12% from June 28th, US gold prices have now beaten the average 1-month gold rally of the last 45 years following drops as bad or worse than April-June 2013.

 Speaking Monday to CNBC, “Gold wants to go higher,” reckons Dennis Gartman, “probably predicated on a continued expectation that the Fed will continue to expand reserves, and so shall too other central banks.”

 The US Federal Reserve meets Tuesday and Wednesday next week to set policy until September.

 “You don’t sell backwardations in any market,” adds Gartman – who said gold was “going lower” on June 24th, but said it was “time to go to the sidelines” 4 days later when gold bottomed at $1181 – “and you specifically don’t sell backwardation in the gold market.”

 Backwardation is when prices for nearer-term delivery are more expensive than future settlement – a rare situation in gold, which incurs storage costs and lost interest on cash over time.

 That creates what’s called “contango”, with prices rising the further ahead settlement is scheduled.

 “[But] I complain about the current claims of backwardation in gold,” counters Nick Laird of gold-chart site ShareLynx, “[because] the spread between the Last/Near Future needs to go below zero for a full inversion.

 “In gold there is little to see except the first couple of months dipping.”

 July gold futures settled Monday at $1336.40 per ounce, 40¢ above the August contract, equal to September, and below all other contract prices.

 “After falling sharply in June on a re-pricing of Fed easing policies, gold prices have [only] stabilized in July,” reckons analysis from investment bank Goldman Sachs.

 Holding its 12-month forecast for the gold price at $1175 per ounce – the 3-year low hit at the end of June – “medium term we expect that gold prices will decline further given our US economists’ forecast for improving economic activity and a less accommodative monetary policy stance.”

 Ending QE and raising rates “is simply a reversal of the process that drove up gold prices from the end of 2008 to mid-2011,” says commodities analyst Gary Clark at Roubini Global Economics.

 “Investors piled into gold ETFs under precisely the opposite conditions: falling real [interest] rates and rising tail risk.”

 US Treasury yields rose Tuesday as gold prices slipped, rising to a 3-session high of 2.52%.

 Inflation was last pegged on the official US Consumer Price Index at 1.8%.

Adrian Ash

BullionVault

Gold price chart, no delay | Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.

(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 OilPrice.com

Australia’s massive mineral exports allowed it to weather the global recession, which began in 2008, quite nicely.

The U.S. government’s Energy Information Administration noted in its country’s analysis for Australia, “Australia, rich in hydrocarbons and uranium, was the world’s second largest coal exporter in 2011 and the third largest liquefied natural gas (LNG) exporter in 2012. Australia is rich in commodities, including fossil fuel and uranium reserves, and is one of the few countries belonging to the Organization for Economic Cooperation and Development (OECD) that is a significant net hydrocarbon exporter, exporting over 70 percent of its total energy production according to government sources. Australia was the world’s second largest coal exporter based on weight in 2011 and the third largest exporter of liquefied natural gas (LNG) in 2012.”

Six months ago Brisbane company Linc Energy Ltd.Energy released two reports, based on drilling and seismic exploration, estimating the amount of shale oil in the as yet untapped 30,000 square mile Arckaringa Basin surrounding Coober Pedy ranging from 3.5 billion to a mind boggling 233 billion barrels of oil.

If the upper end estimates are correct then it means that the Arckaringa Basin is six times larger than the Bakken, seventeen times the size of the Marcellus formation, and 80 times larger than the Eagle Ford U.S. shale deposits.

To put the potential of the Arckaringa Basin in context, Saudi Arabian reserves are estimated at 263 billion barrels.

So, what next for Linc Energy Ltd.? The company has been in discussions to find a partner to develop the Arckaringa Basin after hiring Barclays Plc to help with the process and expects to narrow the talks to one group in a “few weeks,” according to Linc Energy Ltd. chief executive officer Peter Bond. Bond added that Linc Energy Ltd.is talking with at least four parties from outside Australia interested in the shale oil project in the Arckaringa Basin.

Linc Energy Ltd . said that the characteristics of its Australian acreage “compare favorably” to the prolific Bakken and Eagle Ford shale regions of the U.S. Global energy companies including Chevron, ConocoPhillips, Statoil ASA and BG Group Plc are already making shale investments in Australia.

Australian State Mineral Resources Development Minister Tom Koutsantonis said, “Shale gas and shale oil will be a key part to securing Australia’s energy security now and into the future. We have seen the hugely positive impact shale projects like Bakken and Eagle Ford have had on the U.S. economy. There is still a long way to go, but investment in unconventional liquid projects in South Australia will accelerate as more and more companies such as Linc Energy Ltd.Energy and Altona prove up their resources.”

Natural gas?

Six basins in Australia stretching from coastal Queensland to Western Australia’s far northwest contain recoverable shale resources of as much as 437 trillion cubic feet of gas, all of which was previously inaccessible because it is contained in shale formations, which could be unlocked by “hydraulic fracturing.” But the U.S. Department of Energy predicts that Australia’s shale gas industry will develop at a “moderate pace” because the nation’s shale oil and gas resources do not as yet have the advanced production infrastructure that has underwritten the U.S. production boom.

And what if estimates for the Arckaringa Basin basin pan out? We’ll leave the final word to the EIA, which notes, “Australia’s stable political environment, relatively transparent regulatory structure, substantial hydrocarbon reserves, and proximity to Asian markets make it an attractive place for foreign investment. The government published an Energy White Paper in 2012 that outlines its energy policy including balancing its priority of maintaining energy security with increasing exports to help supply Asia’s growing demand for fuel.”

Accordingly, Adelaide had better upgrade its airport to handle all those energy company corporate jets that may well be visiting soon.

Source: http://oilprice.com/Energy/Crude-Oil/Australia-Next-Petro-Superstate.html

By. John C.K. Daly of Oilprice.com

By www.CentralBankNews.info     Turkey’s central bank held its benchmark one-week repurchase rate steady at 4.5 percent but raised its overnight lending rate by a sharp 75 basis points and said it would tighten monetary policy further if necessary to support financial stability.
    The Central Bank of the Republic of Turkey (CBRT), which has been battling to stem the fall in its lira currency, said recent developments had an adverse affect on inflation, including a surge in unprocessed food prices, rising oil prices and the increased exchange rate volatility may continue to adversely impact inflation in the short term.
    “Although the Committee sees these developments as temporary to a large extent, a measured tightening is deemed necessary in order to contain a deterioration in the pricing behaviour,” the central bank said after a meeting of its monetary policy committee.
    “A cautious stance will be maintained until the inflation outlook is in line with the medium term targets. In this respect, additional monetary tightening will be implemented when necessary,” it added.