Month: September 2013

By HY Markets Forex Blog

Germany’s Ifo Business climate slightly picked up lower than expected at 107.7 in September, compared to the previous reading of 107.5 in August, a report by the ifo Institute confirmed on Tuesday.

The composite index based on a survey of retailers, wholesalers and manufacturers picked up 107.7 in September, below Analysts forecasted reading of 108.0.

The Current Assessment Index fell to 11.4, from previous reading 112.0 last month, reports confirmed. The reading came in lower from analysts estimates of 112.5.

The Ifo expectations index advanced 104.2 in September, up from 103.3 in August.

German ZEW

Germany’s ZEW economic sentiment index for September advanced 49.6, up from previous reading of 42.0 in August, indicating that the country is recovering faster than its European partners.

“The financial market experts hold the view that the German economy is still gaining momentum,” said ZEW President Clemens Fuest. “In particular, the experts’ economic optimism has increased due to the improved economic outlook for the euro zone – although recently released economic data for Germany have fallen short of expectations.”

The ZEW Current situation survey rose to 30.6, from 18.3 in August, showing an improvement in the economy.

Services & Manufacturing Flash PMI

Manufacturing in Europe’s biggest economic powerhouse edged down in September, but remained at an expansion rate for the third month in a row, the flash data from purchasing managers confirmed.

Germany’s manufacturing sector’s Purchasing Managers’ Index (PMI) climbed to 51.3 in September, a preliminary reading indicates an expansion for the third month in a row, Markit Economics confirmed on Monday. The readings came in lower than analysts’ estimates of 52.0.

Another data released by Markit Economics, activities in Germany’s services sector posted a reading of 54.4 this month, up from previous reading of 52.8 in august.

“Germany’s economy remained firmly in recovery mode during September, and its strengthening performance should continue to reverberate across the euro area,” Tim Moore, senior Markit economist said. “Positive signs from the German economy are a crucial factor underpinning global business confidence at present, especially while some momentum has been lost across emerging markets,” he added.

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Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

Most Stocks in Europe were seen advancing on Tuesday, ending the two-day losing streak from its previous sessions. As relatively high volatility were seen due to the uncertainty over the US Federal Reserve (Fed) stimulus tapering.

The Future of the US central bank’s $85 billion monthly bond-buying program is still uncertain, as investors were shocked by the Fed’s ‘no-tapering’ surprising decision. On Monday, Fed policymakers gave speeches on the tapering of the US stimulus program, which stirred a debate over the possibilities of the Fed scaling-back on its bond-buying program as early as October.

On Monday, stocks in Europe dropped for a second straight session, as the trader sentiment remained unchanged, even with the flash manufacturing and service Purchasing Managers index (PMI) releases from France, Germany and the eurozone as a whole.

The European Euro stoxx 50 edged 0.19% higher at 2,912.08 points at the market open, while the Germany’s DAX futures advanced 0.15% to 8,647.14 points at the same time. Futures for the French CAC 40 gained 0.22% at 4,181.15 and the UK FTSE 100 futures rose 0.09% to 6,563.07 points.

Stocks In Europe – Economic News

Over the weekend, the Greek government opened talks with its creditors over a third bailout worth around €10 billion. Negotiators are discussing whether 2014 and 2015 will be enough to close the fiscal gap in the country’s budget, according to reports from EU observer.

While in Turkey, the country is not likely to join the EU, according to the country’s Europe minister Egemen Bagis.

In Italy, the country’s finance minister Fabrizio Saccomanni announced he would step down if the coalition government breaches the European Union deficit limits to support tax cuts, according to reports from the Italian newspaper Correire dela Sara.

The world’s oldest functioning bank Monte dei Paschi di Siena, was ready to approve plans as the financial institution needs the EU’s approval for a €4.1 billion bailout and to avert nationalization.

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Article provided by HY Markets Forex Blog

By WallStreetDaily.com

I found myself in an unfamiliar situation last Tuesday.

I was on a plane packed with more than 150 people. Only three were women, however, and they were the flight attendants.

I thought I had either just enlisted – or was on one of those Con Air flights headed to a maximum security prison.

Most of the passengers were burly, sporting various tattoos and wearing hoodies or sunglasses. It was 4 AM.

Of course, the passengers weren’t convicts. The flight was headed to the North Slope of Alaska, to the infamous Prudhoe Bay on the shores of the Arctic Ocean. And they were all about to begin a two-week stint in the various work camps that dot the area.

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Article By WallStreetDaily.com

Original Article: Arctic Journey Part One: Destination Deadhorse

By HY Markets Forex Blog

While there are many benefits that can be created by using covered call strategies, these techniques can be particularly helpful for those who want to mitigate the downside risk that exists during bear markets.

While there are many benefits that can be created by using covered call strategies, these techniques can be particularly helpful for those who want to mitigate the downside risk that exists during bear markets.

For those who want to make money investing, such conditions can be intimidating. Investors have frequently suffered significant loss to their principal during such downward-sloping markets, and they might be very happy to know that there are some strategies they can use to reduce the associated impact.

Managing Risk With Covered Calls
Covered call strategies, which involve investors selling call options on assets they own, can be used to manage the downside risk that exists when markets move lower in value. Individuals obtain a premium when they write these contracts. This income can be used to help offset any losses that happen as asset values decline.

It is also important to note that when an individual writes a covered call, the risk that he is assuming is that his assets will be purchased or “called” away by the person or entity owning the contract. This potential outcome can be problematic if the call is sold during a bull market.

If a person uses one of these strategies when markets are appreciating, there is a higher chance that the underlying securities will be bought. In that event, the market participant who sold the call is at risk of losing out on the subsequent gains that he or she would have enjoyed.

However, the odds that one of these calls will be used are far lower in the event that the market is moving lower in value. Such a situation could be beneficial to a person who is writing a call to gather some income, but does not want to sell his assets sold to the owner of the contract.

Covered Calls & Dividends
Individuals who are considering managing their downside risk by using covered call strategies during bear markets might want to keep in mind that they can potentially obtain even higher income by writing these options contracts on stocks that pay dividends.

Investors who wish to do so must keep in mind that they need to pay strict attention to detail in order to both earn a premium and also receive the dividends that are paid for their underlying security. They can benefit from writing a contract that expires after the ex-dividend date. Individuals who are considering such strategies might also want to keep in mind that if they set the expiry date for the contract too close to the ex-dividend date, it could result in the contract owner having a higher chance of exercising a call.

Naked Call Considerations
Individuals who are considering using covered call strategies to either make money or alternatively reduce whatever losses they would experience should keep in mind one alternative to writing covered calls, which is referred to as writing naked calls. Such strategies involve individuals writing call options on securities that they themselves do not own.

The benefit of doing so is that the investor who sells these calls generates a premium without actually having to be in possession on the underlying security. However, such a move carries considerable risk. If a person sells a call option on assets that he does not own, and then the contract holder decides to use the option to buy the underling securities, the individual who wrote the call will need to purchase the financial instruments and then sell them to the buyer of the call. Such a situation could potentially set the person writing the call up for unlimited losses.

Any investor who is interested in using covered calls should know that these contracts can be harnessed to reduce risk during bull markets. However, an individual must be sure to conduct his due diligence and do the needed research so that he will be prepared to execute these covered call strategies effectively.

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GBPUSD stays in a upward price channel on 4-hour chart, and remains in uptrend from 1.5429, and the fall from 1.6162 could be treated as consolidation of the uptrend. Initial support is at the lower line of the channel, as long as the channel support holds, the uptrend could be expected to resume, and one more rise towards 1.6500 is still possible. On the other side, a clear break below the channel support will indicate that lengthier consolidation of the longer term uptrend from 1.4813 (July 9 low) is underway, then deeper decline to 1.5700 area could be seen.

Provided by ForexCycle.com

Source: Brian Sylvester of The Gold Report (9/23/13)

http://www.theaureport.com/pub/na/sprotts-charles-oliver-sees-the-shine-returning-to-metals

Has the gold price hit bottom? Charles Oliver, senior portfolio manager with Sprott Asset Management, believes that the fundamentals are in place for gold to vault from its downturn—possibly topping $2,000/oz in the next year. In this interview with The Gold Report, Oliver talks about which small-cap miners he’s been adding to his portfolio before the market recognizes the illogical discounts.

The Gold Report: Charles, you believe that gold has bottomed and that the yellow metal will finish the year much higher than where it is now. You and others at Sprott have never wavered in your beliefs, even as others have exited the gold space en masse. Please tell our readers why you believe your faith is about to be rewarded.

Charles Oliver: We’ve seen some positive signs in the market this summer. It looks as if gold has been in the bottoming phase for some time. Valuations are incredibly cheap. There’s been continued debasement of currencies, which has been a driver all along. There’s talk of cutting back on quantitative easing, yet the government continues to print aggressive amounts of money.

During the recent downturn in the gold market, there was significant buying from places like Asia. The Chinese and its counterparts continue to buy gold and silver when the price comes off, as we saw this past spring, and also as stocks rise.

Fundamentally, everything looks very good for gold. The pullback in the gold price, from the high of $1,921/ounce ($1,921/oz) to $1,180/oz, is reminiscent of 1974 to 1976. During that time, there was a big pullback of almost 50% in the gold market followed by a rise from $100/oz in 1976 to $850/oz in 1980.

TGR: You’re about to head out on a marketing tour and visit some potential projects. Do you believe those reasons we just discussed are saleable?

CO: Absolutely. One of the reasons I didn’t do much marketing last year was that it was a terrible time to market. People didn’t want to hear about gold because it was going down. It’s tough to get people to buy when they’re scared. Having said that, those times often present the best opportunities. I feel it’s good to go out and get in front of our unit holders and tell them why they should hold on if they’re having any doubts or, if they’re not in doubt, to build a position.

TGR: Do you still believe gold will get beyond $2,000/oz in the foreseeable future?

CO: I firmly believe gold will be beyond $2,000. The only question is when. There have been some predictions within the Sprott organization that gold could go beyond $2,000 within the next 12 months. There are real reasons behind why that could happen. I don’t know if it will. The timing is one of the toughest things to figure out.

Yet, the fall in the gold price in the face of massive quantitative easing did not make sense. It’s only a matter of time.

TGR: You’ve been even more bullish on silver than gold in the past. Has that changed?

CO: It hasn’t changed. Over the next five years, I expect the silver price will outperform the gold price. During the last 2,000 years, the silver/gold ratio was at 16:1 about 90% of the time. That means that if gold is $1,600/oz, which isn’t far away, the silver price would likely be $100/oz. The current silver price would have to increase more than fourfold to get to that historic norm. The last time that it reached the norm was in 1980 when the silver price reached $50/oz and the gold price was $850/oz, or a ratio of 17:1.

TGR: Do you think we’re going to get back there?

CO: It’s going in that direction. Whether or not we get actually to 17:1—whether or not we overshoot—depends on many different things. However, the current level is closer to 60:1.

TGR: What’s Sprott’s position on the platinum group metals?

CO: We are bullish on platinum group metals. The fundamentals are favorable. The supply side is strong. Most of the supply of platinum and palladium is in South Africa, which is undergoing a lot of strikes, strife and challenges. There’s been talk about shutdowns.

The demand side is also strong. One of the key uses for these metals is for catalytic converters in cars to reduce pollution. I was in Beijing recently and there was a huge amount of smog. The Chinese government has announced a plan to increase emission standards, which means each car sold will need more platinum or palladium.

On top of that, the growth of car ownership in China during the past 20 years is up about tenfold, from about 1 million cars a year to around 10 million cars a year, and is continuing to grow at an aggressive clip. The supply-demand side of the equation looks very positive.

TGR: You’ve made a living seeing opportunities where others see problems or too much risk. Which category do the labor issues in South Africa fall into?

CO: It’s very hard to understand what’s going to happen in South Africa. I don’t currently have any investments in platinum/palladium miners in South Africa, but I have in the past. I am fearful of events that might unfold and what kind of impact they might have on the companies. I prefer to invest in the bullion or in a limited number of companies outside of South Africa.

TGR: The Sprott Gold and Precious Minerals Fund lists Sprott’s “exceptional deal flow and numerous company relationships” as one of the reasons to own the fund. What are some financing deals you’ve worked on this year?

CO: I’ve been involved in a number of transactions. Anything you buy in the space has been beaten up, so it’s at a good price.

I added to my position in Roxgold Inc. (ROG:TSX.V), which just released its preliminary economic assessment (PEA) and has a spectacular-looking deposit in Burkina Faso.

TGR: Roxgold’s 55 Zone deposit is very high-grade. How is its Yaramoko project in West Africa shaping up?

CO: I’m very happy with it. It just came out with its PEA and it has an after-tax return at $1,300/oz gold of just less than 50%. It’s got about a 1.4-year payback. It’s a high-grade deposit.

It’s still in the early stages, but I expect it will optimize it over time and potentially improve its already high internal rate of return. At some point in time, I would not be surprised to see another company take it out. It’s a sweet little project.

TGR: And at a ridiculously low market cap right now, too. A takeover offer doesn’t seem that unlikely with numbers like these—even in a difficult financing environment. Are the risks associated with Burkina Faso overstated?

CO: There’s risk everywhere. You’ve got to quantify it and keep tabs on how it might be changing. I’ve been concerned about places in Africa for the last couple of years. There are some issues out there and one must address that. However, a lot of mining companies are in fairly isolated places where they can continue to operate even when certain events are going on within a country. I’m cognizant of the risks and I diversify my portfolio.

TGR: What other companies have you been buying?

CO: I added to my position in U.S. Silver & Gold Corp. (USA:TSX.V; USSIF:OTCQX), which is run by a couple of former Barrick Gold Corp. (ABX:TSX; ABX:NYSE) people and has a silver mine in the U.S.

I’ve also added to my position in Atna Resources Ltd. (ATN:TSX) in Nevada.

TGR: What brought you to the U.S. Silver & Gold project? Was it the Barrick personnel?

CO: I’ve known Director Alex Davidson for more than a decade. I like CEO Darren Blasutti and his management team. I had been an investor in the deposit, which is next to Hecla Mining Co.’s (HL:NYSE) deposit, and always thought it was interesting. It became even more interesting when Darren and Alex got involved. These are people with big company mining experience who know how to do things right. They’ve also done a bit of exploration. No surprise—U.S. Silver & Gold is actually finding some great potential down below in the mine.

TGR: Are there some new companies that Sprott is working with that our readers should know about?

CO: I’m always looking for new companies. In fact, during the next couple of weeks, I’m going to be meeting with many new companies. Until they’re an existing position in the portfolio, I can’t talk about which ones they are, unfortunately. That’s the secret sauce!

TGR: Every mining stock portfolio has taken a few hits during the past couple of years. How would you respond when someone asks why you stay in the small-cap mining space?

CO: I’ve made my name on the long-term performance of small-cap mining. We make mistakes and learn from them. There are mining cycles. I try and adjust my weightings in certain sectors periodically when I believe one sector will be in favor or out of favor. Hopefully, next time I’ll do a better job of recognizing when the big downturn is coming in small caps. However, when the Federal Reserve increased quantitative easing from $45 billion to $85 billion a month, I believed that it was time to start investing in small-cap names. Clearly the market has gone down since then. I don’t think that was logical. Even if I were to go back in time, I’d react exactly the same way. We won’t get it perfectly, but we try to outperform on a long-term basis.

TGR: What about someone who argues with you on the basis of the lack of liquidity?

CO: Liquidity is something you’ve got to manage. I hold about a third of my portfolio in large caps and a third in mid-caps on a full-cycle basis. I do that because I need to maintain liquidity. If an investor can be locked in for five to seven years, I would suggest a larger holding in small caps. If liquidity isn’t an issue, small caps are the best place to be.

TGR: When you talked with Canada’s Business News Network in June, you said Unigold Inc. (UGD:TSX.V) was your top pick in the small-cap space. Is that still true?

CO: It’s still a big favorite of mine. I’ll actually be meeting with CEO Andrew Cheatle to get an update in the coming weeks. Once the company has an NI 43-101 for its property in the Dominican Republic, it should show a very sizeable resource. At some point, value will surface. I’ve been an investor for more than four years.

TGR: Tell us about the Neita and Candelones projects.

CO: Unigold has done a lot of drilling, but it hasn’t put down a resource on paper. When I meet with Andrew, one of the questions I’ll be asking him is about when it will come out with a resource. At one point, he was talking about coming out with one before year-end.

TGR: There’s a news cycle in this business. Things tend to get lost toward the end of the year. Do you think Unigold is waiting for the new year?

CO: It’s waiting for the right time. It is best to wait for a market that cares. We’ve been in a market for the last year or more that doesn’t care. It’s frustrating as a portfolio manager to see companies that come out with good news be sold off. It’s not a rational thing. A lot of the junior companies have been holding back some of their good news for a period when the market actually cares again about good news.

TGR: Why have you stuck with Unigold for four years?

CO: At the early stage, it was a very cheap company with a lot of historic drilling. But it got caught in the asset-backed commercial paper situation. It was holding a bunch of cash to use for exploration. It set it back. A new management team and board took the reins and helped to raise money to get drilling going. The company has been doing a lot of induced polarization and other geophysical work. It can take a long time to build and develop a mine. You have to be patient, but the rewards can be huge over the long term.

TGR: Looking back at the third quarter, what were some summer catalysts at the companies you own that the market has yet to fully value?

CO: Roxgold came out with a PEA with spectacular results that have not been factored into its value.

I visited the Brucejack deposit of Pretium Resources Inc. (PVG:TSX; PVG:NYSE). This summer it was doing a 10,000-ton bulk sample of its deposit from underground, with results expected in the next few quarters.

TGR: Is the Valley of Kings zone a kingmaker?

CO: The grade there is spectacular. It is going to be a mine, in my opinion. The biggest question is: What will the mining costs be and what type of mining will it try to get the most economic reserve? When I was underground I could see these veins extending a reasonable distance. Of course, you can’t always trust what you see with the eye because the engineers are going to ultimately put some parameters around the width and grades and figure out what the best mining is going to be.

I also like Tahoe Resources Inc. (THO:TSX; TAHO:NYSE), a silver company run by Kevin McArthur, who has one of the best track records for building mines over the past decade. Tahoe has a Guatemalan property, which is a high-grade, low-capex project. It is ramping up into production as we speak. It could be a spectacular mine. We’ll have to see how the ramp up goes, but it’s at that point.

TGR: When will it start generating cash flow?

CO: That’s the million-dollar question. Hopefully, it will be cash-flow positive sometime next year. Ramp-ups can be challenging, but if there is someone in the industry that can do it, I’d bet on Kevin McArthur.

TGR: What do you think of Escobal?

CO: It’s a very special deposit. Big, high-grade deposits are far and few between. Sprott used to hold shares of Palmarejo, which was eventually sold and we are current shareholders of MAG Silver Corp. (MAG:TSX; MVG:NYSE), which has nice deposits. MAG Silver should be in production around 2018.

TGR: What can you leave us with to buoy our spirits?

CO: My father always used to tell me that after the bad times, the good times come. It has been very tough out there for the last couple of years. I know a lot of investors have given up and thrown in the towel. There’s been a lot of blood in the streets. But the fundamentals all add up. It’s not going to be much longer before we get back to those good times. Hang in there. Valuations are great and the fundamentals continue to be very positive.

TGR: Some colloquial wisdom from Charles Oliver. Thank you.

CO: My pleasure.

Charles Oliver joined Sprott Asset Management in 2008. He is lead portfolio manager of the Sprott Gold and Precious Minerals Fund. Previously, he was at AGF Management Limited, where his team was awarded the Canadian Investment Awards Best Precious Metals Fund in 2004, 2006 and 2007. His accolades also include: Lipper Awards’ best five-year return in the Precious Metals category (AGF Precious Metals Fund, 2007), and the Lipper award for best one-year return in the Precious Metals category 2010.

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DISCLOSURE:

1) Brian Sylvester conducted this interview for The Gold Report and provides services to The Gold 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 Gold Report: Roxgold Inc., Unigold Inc., Pretium Resources Inc., Tahoe Resources Inc. and MAG Silver Corp. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Charles Oliver: I or my family own shares of the following companies mentioned in this interview: None. 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: Sprott owns shares of all companies mentioned. Sprott is in no way financially compensated by the companies mentioned in this interview. 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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Article by Investazor.com

The most awaited news for the Euro zone was the result of the German elections. As everybody was expecting, Angela Merkel’s Conservative Party won with 41.4% of the vote while her Liberal partner failed to make it into the Parliament. The result of the election pleased central banks as urgent matters concerning their activity needs the involvement of the chancellor who now is finally established.

Today were released the PMIs for the services and manufacturing sectors for French, Germany and the Euro zone. Read one of my previous article, you can understand better what a PMI means. Thus, the PMIs in the services sector beat all expectations, reflecting a propulsion of 1.8 points for French, 1.6 points for Germany and 1.4 points for the Euro zone. Is encouraging to see that the French services sector overcame the 50 points threshold, showing that the field is expanding for the first time since January 2012.

Today Mario Draghi gave another speech. He maintained his positive thinking about the slow recovery of the Euro zone, while maintaining the low interest rates for an extended period of time. A refinancing operation may be needed for the european banking system and Draghi is ready to use any tool needed in order to improve the results of the economy. The next concerning matter is again Greece which is currently requiring another tranche of funding worth 1 billion euro. Regarding the latest decision on the United State’s territory, the chairman of the European Central Bank expressed his approval for the decision to continue with the Quantitative Easing program as long as needed.

For the moment the Euro zone is going through a period of silence as Angela Merkel remained the Chancellor of Germany and will continue to approach the European crisis as before. On the other side, the European economy keeps giving positive signals, even if they are less significant, they are considers step towards a sustainable growth.

The post Euro Area Strengthens, Merkel Remains a Major Player appeared first on investazor.com.

By OilPrice.com

Three years has seen the overturn of two government, the deaths of thousands of people and the destruction of much of the Egyptian economy. In the end, the mobs have changed nothing, except to make their own lives more miserable.

It was a year ago in August of 2012 that the Morsi government approached the International Monetary Fund for a 4.8 billion dollar loan. That was an increase from the 3.2 billion dollars that the interim military government had sought and that the Muslim Brotherhood members of the parliament had opposed.

Getting the loan was critical. If Egypt could raise the funds, it would be in a better position to borrow from other sources. The IMF calculated that Egypt needed at least ten to twelve billion dollars to survive for another year.

First, though, Egypt would have to meet certain standards before a loan could be granted. The deficit had risen to 8.7 percent of the budget and that would have to be reduced. Income tax on higher income earners and a higher consumption tax on a variety of goods would have to be imposed. Bread and energy subsidies that consume a third of the budget needed to be cut sharply.

Mubarak had understood in 1977 that the subsidies were a drain on the national budget and tried to raise prices. He learned when the mobs when into the streets the lesson that is as true today as it was thirty-six years ago. A large portion of the Egyptian population views the subsidized items as a right. 40 percent of the population lives below the poverty level and would find their hardship turned into desperation by an increase in prices. A quarter of the population of 84 million faces some degree of malnutrition and can be brought into the streets without much encouragement.

In December, the mobs were already in the streets to protest Morsi’s usurpation of power as he pushed through his constitutional obsession that was the focus of his government when the taxes and prices were raised. Instead of abandoning the constitutional conflict in order to resolve an economic crisis, his administration chose to concentrate upon fighting a political war by abandoning the loan. It was easier for him to defuse one angry mob by canceling the tax increases and the subsidy decreases than it was to appease the mobs opposing his dictatorial rule.

He had acquired an economy with structural flaws that would take decades to correct. Egypt was and remains a rent funded economy that puts the source of wealth beyond the control of the state. Revenue from the Suez Canal and the Sumed Pipeline, tourist spending, remittances from Egyptians working abroad, and foreign aid support the state. Before the revolution resulted in the closure of forty-five hundred enterprises and the flight of capital offshore, only 13 percent of foreign earnings came from the export of manufactured goods.

Short of raising fees for use of the Canal or pipeline, that source of income is relatively inflexible. Tourism was discouraged by news reports of twenty-five riots or demonstrations per day somewhere across the country and a three hundred percent increase in the murder rate. The civil war in Libya sent most of one and a half million Egyptian workers home to congested cities, inflated the unemployment rate, and cost the countries desperately needed remittance payments.

The one hope came from foreign aid. Qatar funneled 8 billion dollars to Egypt. Turkey provided another two billion and Libya added 2 billion more. Each contribution made is easier to delay settling the loan with the IMF. It avoided the humiliation of submitting to foreign dictates that threatened to ignite a civil war.

The government was engaged throughout the period in a struggle between the availability of quality bread at an affordable price and the survival of the currency. Egypt must import fifty percent of its wheat. Between 2006 and 2011 the price of wheat and fuel rose by 300 percent. Under usual circumstances, Egypt runs a fifty percent trade deficit that must be offset by the rent sources of income. Once the disorders began inside and outside of Egypt, the collapsing economy meant that the usual circumstances no longer applied.

Since the start of the Revolution, the Central Bank of Egypt has been engaged in a futile effort to curb the inflation by supporting the exchange rate of the currency. The Strategy has been to allow for a gradual 3 percent depreciation of the Pound by maintaining a managed float. That has drained the reserves from 36 billion to 14 billion of which only half was available for international payments.

A million jobs had been lost since the outbreak of the Revolution in January 2011. Inflation had risen above 10 percent, and foreign reserves had dwindled to a mere two months in funds to finance imports.

These were numbers that the government could not easily conceal from the public. What the Morsi administration was more interested in hiding was that wheat reserves were down to two months and that the people were on the edge of a famine as well as a currency collapse.

The bulk of the imported wheat comes from Russia that produces a high gluten grain preferred for the making of unleavened pita bread that is a staple of the Egyptian diet. The Morsi regime found itself at odds with its main food supplier that was concerned about the spread of radical Islamic movements inside of Russia.

The Russian anxiety was made worse by Morsi’s support of the rebel movement in Syria where Moscow was supporting the Al-Assad regime. In spite of the looming crisis that Egypt was facing, Morsi called on June 15th for a jihad in Syria that assured Russian unwillingness to provide the desperately needed grain.

It was not until shortly after the coup that the United Nations Food & Agricultural Organization announced the social disorders and the abrupt increase in the birth rate threatened a food shortage. The emergency loans and grants of 12 billion dollars from Saudi Arabia, Kuwait, and the UAE has given Egypt the means to purchase the wheat on the open market, and the Russians have indicated their willingness to sell what wheat is available. Just in time, the new government has discovered abundant supplies of diesel fuel and butane that will enable the farmers to complete their harvest and to transport the grain to the mills. The rapidity with which the new administration located the previously scarce fuel reveals that the mismanagement by the Brotherhood of the economy and the negative natural economic forces were made worse by the manipulation by government agencies.

The 6.8 million government employees had a vested interest in bringing down the Brotherhood backed government. The Brotherhood was advocating the privatization of the state owned industries. That was threatening the economic interests of the military that controls a third of the economy and the jobs of the government workers. Morsi was following the same policy that contributed to the mob led coup that enabled the military to remove Mubarak.

Between 1991 and 2009, 382 state companies were sold by the Mubarak administration to private investors for a total of 9.4 billion dollars. Economic reforms to encourage foreign and domestic investment introduced in 2004 attracted foreign investment that grew the economy in 2008 at an annual rate of 7.2 percent from 4.1 percent. In spite of the impressive improvement, the overall unemployment rate remained above 9 percent and 25 percent for the youth that comprise a majority of the Egyptian population. University graduates found that their inferior education did not qualify them for employment and were forced to join the ranks of the unemployed. Neglect of the agricultural sector sent an influx of rural migrants into the crowded slums of the cities. The combined hopeless masses formed the powder in the time bomb that exploded in January of 2011.

Removing Hosni Mubarak was the easy part of the coup that the public imagined was a revolution. Finding a replacement was the harder part especially when the only choice was the Muslim Brotherhood that had been an enemy for sixty years. It was for the military the possibility of preserving its privileges of a separate state within a state. Since Morsi was deposed, the military has separated itself still further from the political system by amending its oath of loyalty to exclude any reference to the president.

The Brotherhood gained from the arrangement access to political power for the first time in its eighty-five year history, but assuring that they would be able to keep that power was not a part of the deal. That was made clear in January 2013. General Abdul Fattah el-Sisi, the defense minister, said in an address to military cadets, “Political, economic, social and security challenges” require united action “by all parties” to avoid “dire consequences that affect the steadiness and stability of the homeland.”

The warning was ignored. Morsi’s call on June 15th for a jihad in Syria provoked General El-Sisi to declare that the military’s duty is to defend the borders of Egypt.

The next step in dooming the Morsi Administration came on June 17th when seventeen new governors were appointed. These included eight Islamists, seven of whom belong to the president’s Muslim Brotherhood party. Of all of the appointments, it was the granting of the office to Adel al-Khayat as governor of Luxor that provoked the strongest reaction.

Al-Khayat is a member of the Building and Development party, the political arm of Gamaa Islamiya. The terrorist organization was responsible for a 1997 attack at Luxor’s Hatshepsut Temple, where 58 foreign tourists and four Egyptians were murdered by six members of the group.

While the people of Luxor protested the appointment of a terrorist to the govern ship, the military was lamenting the loss of the destination for retiring military officers. The office of governor was one of the privileges reserved for their members.

The environment that allowed for another coup that the mobs could label the reclaiming of its revolution was set with the petition circulated by the Tamarod Movement that called for nationwide demonstrations on the anniversary of the Morsi presidency. The mob bolstered by the support of the army has become addicted to the taste of political blood with the defeat of the Hosni Mubarak regime and the real possibility that Morsi too was fall. The mob became its own Roman Circus. Screaming for the destruction of the Brotherhood had nothing to do with solving the real problems that require massive reforming of the economic and political structures. What the mobs failed to grasp while they were urging the armed forces to oust Morsi was that the military is a major source of the poverty and tyranny. The generals cannot make those changes without surrendering the deeply entrenched privileges that is a key part of their elite standing.

The privileges of the military take many forms. Only 8 percent of land is registered. The remaining 92 percent cannot be counted as part of the national wealth and is not available to the average citizen. The lack of confirmed ownership means simply that investing in the property is not possible and that holds down the opportunity for people to accumulate wealth. It does not prevent state businesses or friends of the authorities from using the land that will not appear on any official records.

Government regulations block those without the connections from acquiring within a reasonable period of time and at a reasonable cost something as simple as a telephone. It is why 9.6 million people are employed in the underground economy where they can escape the burdensome regulations and costs while only 5.9 million are employed by the private sector that is public. The businesses in the underground economy do not have access to regular sources of financing and are not available to provide tax revenue.

None of this will change so long as the leadership has access to foreign loans and grants. How long the money will keep flowing remains to be seen. In Cairo, there is the general view among the leadership that Egypt is simply too important to be allowed to fail. It was one reason that Morsi thought that he had the advantage bargaining with the IMF and with Washington. The generals also hold the view that Egypt is entitled to the aid and will in one way or another get it from someone. Who that someone is really doesn’t matter.

The only real concern is how they will pay for the contributions. The United States demands little more than the assurance that Israel would not be attacked, but then, the American aid of 1.5 billion dollars is a minor sum that gives little demanding rights. The Saudis are offering 8 billion with additional funds of 4 billion from close allies; and that gives the Saudis considerably greater demanding rights. What they will demand is likely to take the Middle East into a new era.

Source: http://oilprice.com/Geopolitics/Africa/Egypt-for-Sale.html

By. Felix Inmonti for Oilprice.com

By www.CentralBankNews.info     Israel’s central bank cut its policy rate by 25 basis points to 1.0 percent due to inflation below the midpoint of the bank’s target range, slower-than-expected domestic growth, a possible slowdown in advanced economies and continued appreciation of the shekel currency.
    The Bank of Israel (BOI), which has now cut rates by 75 basis points this year – including two cuts in May to stem the rise in the shekel – cut its forecast for growth this year to 2.6 percent from a previous forecast of 2.8 percent, excluding the contribution of natural gas production from the new Tamar site.
    Including gas production, Israel’s Gross Domestic Product is forecast to expand by 3.6 percent this year, down from 3.8 percent in the previous forecast.
    Next year, Israel’s economy is expected to slow down from this year due to a smaller contribution of gas output to economic growth, a decline in the growth of public spending and lower growth in private consumption due to higher taxes, the BOI said.
    GDP in 2014 is forecast to grow by 2.7 percent, up from a previous forecast of 2.5 percent, excluding gas output. Including gas output, Israel’s economy is forecast to growth by 3.4 percent, up from a previous forecast of 3.2 percent.
 

London Gold Market Report
from Adrian Ash
BullionVault
Mon 23 Sept 09:35 EST

BOTH the price of gold and silver recovered early losses Monday morning in London, regaining a 1% and 2% drop respectively as world stock markets slipped with commodities.

 German Bunds held flat, but the Euro currency dropped half-a-cent to a 3-session low after Angela Merkel was returned as German chancellor in national elections.

 “Fed fever has broken,” said one floor trader quoted by CNBC on Friday, with markets performing what another broker calls “an incredible about-face” at the end of last week to erase Wednesday’s sharp gains after the US central bank held its QE money printing program unchanged.

 Longer-term – and blaming late-August’s news from Syria for gold’s 9-week rise starting end-June – “We expect market cheer will be capped and a return to status quo,” says Citigroup in a widely-cited report.

 “The postponement of the [QE] tapering decision by the FOMC represents only a short-term reprieve for gold,” Citi’s analysts go on.

 “Does this mean the end of the downtrend? In our view, the fundamental and clear answer is no.”

 “While any further postponement,” agree Morgan Stanley analysts, “would likely continue to benefit gold prices in the near term, we still think it is just delaying the inevitable.

 “The longer-term narrative for gold remains in place – waning investor appetite for a risk and inflation hedge, challenged physical demand and a rising US Dollar.”

 Morgan Stanley now sees gold trading in a range from $1200 to $1350 to year-end, before falling further in 2014.

 Citi sees the gold price averaging $1250 per ounce across full-year 2013. It has so far averaged $1460.

 The bank’s analysts meantime forecast an 11% rise in the S&P500 index by New Year.

 Speculative traders using futures and options cut their bullish bets and grew their bearish bets on gold last week ahead of the US Fed’s “no tapering” surprise.

 Latest data from US regulator the CFTC put the “net long” position of these non-industry traders equal to 292 tonnes last Tuesday – barely 51% of the last 5-year average.

 So-called “small speculators” – meaning private individuals and other ‘unreportable’ positions – meantime cut their net long on gold futures and options to the equivalent of just 25 tonnes.

 That was barely one fifth of their 5-year average.

 “The Fed’s decision to continue with an ultra-accommodative monetary policy arguably paves the way for a rebuilding of long positions after the recent short covering,” says Mitsubishi analyst Jonathan Butler.

 Short-term, he adds, “Trading should be choppy as investor sentiment alternates between tapering (negative for gold) and the impending US debt ceiling (positive for gold).”

 Moreover, the next week brings the end of September and so the end of the third calendar quarter. So “few people will want to establish fresh longs right now,” reckon brokers Marex in a note.

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 fully allocated bullion already vaulted in your choice of London, New York, Singapore, Toronto or Zurich for just 0.5% commission.

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