Month: October 2013

GBPUSD stays below a downward trend line on 4-hour chart, and remains in downtrend from 1.6259. As long as the trend line resistance holds, the downtrend could be expected to resume, and another fall towards 1.5800 is still possible. However, as long as 1.5800 key support holds, the fall from 1.6259 would possibly be consolidation of the longer term uptrend from 1.4813 (Jul 9 low), and one more rise towards 1.6500 could be expected after the consolidation. Now the pair is facing the trend line resistance, a clear break above the trend line could signal completion of the downward movement from 1.6259, then further rise to test 1.6259 resistance could be seen.

Provided by ForexCycle.com

By MoneyMorning.com.au

From 2007 to late 2008 it would be fair to say we were bearish on the markets. That means we thought there was a chance stocks would fall.

Although if we’re honest, they fell much further than we expected.

From late 2008 to late 2009 we were bullish. From that point on until early 2012 we were largely neutral to bearish again.

Since early to mid-2012 we’ve had pretty much one thing on our mind – a raging bull market for stocks. And while many seem to think the bull market glory days are over, we’re in no mood to agree.

In fact, despite the volatility and the bearish market atmosphere, we still say that stocks are heading in one direction over the next 18 months, and that’s up…

That’s not to say there won’t be some bumps along the way.

There’s still a chance that the US government will default on its obligation to pay interest and principal on its bonds.

While a default would be good in the long run, in the short term it would have a big impact on the markets. Remember that US government bonds affect the prices of all securities worldwide.

That’s because investors see US government bonds as a risk-free investment. Every other investment such as bonds, stocks, and mortgages has its price in some way determined by the US bond price.

The Next Rally Could be Just the Beginning

There’s also the question of whether new US Federal Reserve chairman, Dr Janet L Yellen, will continue to print money and buy US government bonds.

Many think it will be business as usual under Dr Yellen. To your editor it’s a no brainer. There’s no way the Fed will halt a policy that has helped boost stock prices to a record high.

This is why we’ve set a price target of 6,000 points for the S&P/ASX 200 by early next year, and 7,000 points in 2015. If we’re right and the market gets there then anything is possible after that. In fact if the market really starts to bubble you could see stock prices reach 15,000 points by 2017.

We’ll admit it’s an out-there call. But similar sized increases have happened in the past. The Australian stock market doubled from mid-2004 to late 2007. That was just over three years:

Source: Google Finance

So is it really so crazy to think stocks could do something similar over the next two to four years?

Remember that the Australian market is only up 65.6% since the March 2009 low. So it’s not as though the market has exhausted all its potential gains. Although as we mentioned in yesterday’s Money Morning, a selection of Aussie blue-chip stocks have performed much better than the broader index.

Bear Market Trades in a Bull Market

But despite our talk about stocks going up, it’s important to remember that we’re not a cheerleader for the stock market and the current state of the world economy.

We understand there are problems…big problems. But we also understand that this is exactly the type of market where you can make some serious money.

Of course, not everyone agrees with our view. There are still a lot of bears saying the market is set to fall. But so far it has been a tough year for most bearish hedge fund traders. Although some bears have done better, such as our old pal Dan Denning, who has helped his readers make money without short selling stocks.

The reason the hedge funds have gotten it so wrong is that they’ve tried to short what has been (so far) a gradually rising market.

Source: Google Finance

It can be hard to make money short selling at the best of times. It’s even harder when stocks keep going up despite the worsening macro-economic outlook.

But to make matters worse it seems the short sellers may have been the victims of their own actions. As the Bloomberg report notes:

‘The embrace of bearish trades has squeezed returns for professionals and is one reason stocks have repeatedly rallied in 2013 amid slowing economic and profit growth, according to Cambiar Investors LLC and Pension Partners LLC. Rather than falling, shares that investors have shorted the most are up 38 percent since January, a consequence of forced buying during rallies by speculators who borrowed and sold them, data compiled by Goldman Sachs Group Inc. show.‘

So not only have the stocks short sold by hedge funds not fallen, but those stock have almost doubled the performance of the S&P 500 during the same timeframe – which is only up 21.9%.

Talk about a kick in the guts.

Crash Alert Set to High, but We’re Still Buying Stocks

And doubtless last night’s market action has given them another kick. With all the talk about the US budget and debt ceiling talks still up in the air, it would have been reasonable to think stocks would fall. But they didn’t. They closed the day up 0.4%.

The tech-heavy NASDAQ index did better, gaining 0.6%.

Even so, we’ve always got our crash alert set to high. We’re always looking out for excessive bravado. (Maybe our own claim about the market hitting 7,000 is excessive bravado and should be a warning in itself!)

But there is a difference. We get it that the world economy is living on borrowed time. Most in the mainstream still don’t quite get it. More from Bloomberg:

‘“There still are people out there who are convinced the whole market and financial system is some house of cards,” said Brian Barish, president of Denver-based Cambiar Investors, which manages about $8 billion, said Oct. 10. “I think they wind up shooting themselves and their investors in the foot with the permabear mentality, but it persists.”‘

That’s the voice of someone who doesn’t get it.

That’s the voice of a financial advisor who probably has most of their client’s money invested in stocks without any thought that stocks could crash.

As for us, despite our call of the ASX hitting 7,000 we’ve still got a level head when it comes to investing. We know that you can make a lot of money, but we also know it’s risky.

Our bet remains that the US deadlock will end within days. Providing you understand the risks, our view is that you should use the current price weakness as an opportunity to buy stocks. Once the US politicians reach a deal it could signal the start of the next rally.

Cheers,
Kris+

From the Port Phillip Publishing Library

Special Report: UNAVOIDABLE: Australia’s First Recession in 22 Years

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By MoneyMorning.com.au

There’s plenty of gushing about the Janet Yellen appointment as Federal Reserve Chairman. Yale economist Robert Shiller says she’s ‘a real mensch‘.

Greg Mankiw from Harvard says President Obama made a great decision in choosing her. ‘Reports of Janet Yellen’s forthcoming nomination will be greeted well by market agents,‘ says David Kotok. ‘It should be.‘

However it was this endorsement which most caught my attention. ‘Yellen is quite simply more qualified for the job than any of her predecessors,‘ claims Justin Wolfers with the University of Michigan. ‘She’s an imaginative and technically adept economist possessed of a brilliant and precise mind.‘ Wolfers continues, ‘Tonight, I feel reassured that my daughter’s economic future is in good hands.‘

First we should take pity on any man who honestly believes a Fed Chair has the power to make a child’s economic future bright. But he does make a living teaching economics and public policy, so delusions like this aren’t that unusual for someone in that profession. However, the ‘simply more qualified‘ quote has been used before and may shed light on a bleak future.

The Past Set to Repeat

When Arthur Burns was nominated by Richard Nixon to be Fed Chair, Milton Friedman wrote in Newsweek, Burns ‘is the first person ever named Chairman of the Board who has the right qualifications for that post.‘

The previous Chairmen were in Friedman’s words, ‘able, public-spirited men with high standards of integrity and service.‘ However, none saw the big picture, only having ‘experience in individual business or financial institutions,‘ and none ‘had any training or special competence in the problems of the economy as a whole.‘

‘Arthur Burns is at the right place, because of the extraordinarily important influence monetary actions exert on the economy as a whole-and also because the Fed is the preeminent financial institution in the world.‘ Friedman went on to write the time was right for a man like Burns to change the Fed’s ‘basic philosophy‘ and move the central bank ‘to a less restrictive policy.‘

The nominating of Burns started the dollar on the PhD standard, as the gold standard was cast away not long after Burns took the job. The Columbia professor had no experience in the real world and Friedman, despite his free market reputation, believed Burns’ experience was perfect to run the central bank. His mentor’s experience as a college professor and working for government is what had Friedman convinced.

Burns was Friedman’s professor at Columbia and the two were close. Friedman wrote, ‘Save for my parents and wife, no one has influenced my life more than Arthur.‘

Like Burns, Janet Yellen has spent her career in academia and government. She was an assistant professor at Harvard in 1971-76 and was then an economist with the Federal Reserve Board of Governors.

Yellen conducted research at the University of California, Berkeley’s Haas School of Business and taught macroeconomics to full-time and part-time MBA and undergraduates students.

She’s been President and Chief Executive Officer of the Federal Reserve Bank of San Francisco, and Chair of the White House Council of Economic Advisers under President Bill Clinton.

Burns believed he could fix economic problems with policy. He began to lay the groundwork for economic engineering, telling a congressional committee, ‘The rules of economics are not working the way they used to. Despite extensive unemployment in our country, wage rate increases have not moderated. Despite much idle industrial capacity, commodity prices continue to rise rapidly.‘

The Impossible Task of the Fed

Burns gunned the money supply to jump start the economy in hopes of getting his boss re-elected. When stagflation reared its ugly head, Burns blamed everything but his loose money policies. ‘He thought that inflation persisted because it was ingrained in the attitudes of businessmen, workers, and consumers, and that an effective incomes policy offered the best way to change these attitudes,‘ writes Burns biographer Wyatt Wells.

In a 1976 speech, Burns cited the business community’s ‘exuberant mood‘ and ‘waves of speculation‘ as inflation causes. After leaving the Fed, in a lengthy speech delivered in Belgrade, Burns conceded that central banks had been ‘participants in the inflationary process in which the industrial countries have been enmeshed, but their role has been subsidiary.‘

As F.A. Hayek pointed out in his Nobel acceptance speech, humans lack the knowledge to implement the correct monetary policy to achieve the outcomes desired.

Hayek said, ‘If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible.‘

It is not possible for any one human to have the knowledge needed to accomplish the goals established for the Federal Reserve. No person can assure Mr. Wolfers’ daughter her economic future will be bright. Ironically, that might only happen if Yellen took the job but then stepped aside to let the market determine interest rates and the flow of capital.

Given Yellen’s views and experience, best case, the professor’s daughter can look forward to a world of no-growth punctuated with the occasional banking crisis. In the worst case, Ms. Yellen will conjure up the memory of Arthur Burns.

Douglas French
Contributing Writer, Money Morning

Publisher’s Note: This article originally appeared here.

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Source: Brian Sylvester of The Gold Report (10/14/13)

http://www.theaureport.com/pub/na/tom-szabo-the-peerless-way-to-precious-metal-profits

Tom Szabo, an investment strategist and principal of MetalAugmentor.com, does not believe that you can judge all gold companies the same. Szabo uses the Peerless concept to rank companies qualitatively, but dynamically as their circumstances change. In this interview with The Gold Report, Szabo discusses explorers, developers and producers that he believes are one of a kind.

The Gold Report: In a July research report, you wrote that the ongoing decline from the all-time high in the gold price may represent a correction of the last large up leg, which some say began in 2009 or mid-2008. Or it may represent a correction of the entire 1999–2011 advance in the gold price. Which is it? And has that correction run its course?

Tom Szabo: We are in a correction of the 2008–2011 rally and it is ongoing. Big picture, the gold price needs to drop below $1,155/ounce ($1,155/oz) and then subsequently below $1,067/oz before this would represent a correction of the entire gold cycle that goes back to 1999. We haven’t seen such a decline at this point so we can’t conclude that it’s a larger correction.

TGR: We’ve seen modest upward momentum in the gold price since the lows of April. Is there enough momentum to invest in gold equities?

TS: There are smaller cycles within a correction. So long as investors select the right gold equities they can do well. A lot of projects are viable at this gold price. A lot of discoveries are going to become mines at this gold price.

TGR: What’s your near- and midterm forecast for gold and silver?

TS: I suspect we will see a secondary low for gold, perhaps near the low that we reached this past summer, before this entire corrective wave is over. Potential lows are $1,155/oz and $1,067/oz. Longer term, about three years or less, I suspect that gold will again challenge its 2011 high.

TGR: Is silver going to follow suit?

TS: Silver will follow gold, especially during the initial phase of a rally. As a rally progresses, silver has the distinct ability to overshoot expectations. I easily see it exceeding $50/oz and spiking to a $70–80/oz level before settling to a low in the $30–40/oz range.

TGR: What is the sweet spot right now: explorers, developers or producers?

TS: In this market, it has to be about growth, which is a concept that can be applied to all of those categories. Explorers make discoveries and grow the resource. Developers grow by taking a project into operation. Producers grow by adding capacity, upgrading or bringing additional projects into development.

TGR: MetalAugmentor.com uses the Peerless system to rank the quality of companies. How does that system work?

TS: The Peerless system is a subjective determination that is based on quality. We consider the factors that point to the success of an enterprise. Success can be measured in different ways and means different things depending on the development stage of a company and its projects. We use different criteria for an explorer versus a producer versus a developer.

It is also a binary rating where a company is either peerless or not. We don’t rank a level of peerlessness, although we do keep track of potential peerless candidates that don’t quite have all of the pieces together yet.

TGR: What companies are considered peerless by MetalAugmentor.com?

TS: A company like Cayden Resources Inc. (CYD:TSX.V; CDKNF:NASDAQ). The company’s strategy worked out really well in acquiring its two main projects in Mexico.

TGR: Cayden was approached by some companies seeking a stake in the Las Calles project. Could you tell us more about that?

TS: I don’t think it’s a secret that there is interest from other companies about potentially monetizing that opportunity.

The Morelos Sur project is next to Goldcorp Inc.’s (G:TSX; GG:NYSE) Los Filos project, one of the more profitable gold mines. Cayden sold a portion of that land position, which Goldcorp needs for infrastructure, heap leach, roads and other things, for about $16 million. Cayden still holds a very strategic piece of land called Las Calles, which separates the Los Filos and El Bermejal pits. Expansion plans are essentially going to join them together. The problem for Goldcorp is that there’s a strip of land that Cayden owns in between—Las Calles. It will have to acquire rights to that.

Companies have latched on to this and I’m presuming they now may want to offer Cayden an early monetization in exchange for any upside from the eventual conclusion of the negotiations with Goldcorp. From Cayden’s perspective, it could be attractive if it needs money for exploration or to build a mine at El Barqueño.

TGR: What other companies are considered peerless?

TS: One is SilverCrest Mines Inc. (SVL:TSX.V; SVLC:NYSE.MKT) in Mexico. The company has a project that is expanding and going underground, as well as a project going into the development stage. Its capital constraints and size should allow SilverCrest to develop such a project into a producing asset.

TGR: You’ve called SilverCrest a growth story. Can you explain that further?

TS: SilverCrest is interesting because it started with a project that was not an existing mine. Many current operations in Mexico are old silver mines that have been revived during this latest mining cycle. SilverCrest’s Santa Elena was a new project. Now it’s going underground.

While other companies went dormant after the 2008 crisis because money wasn’t available, SilverCrest pushed ahead. It sold a portion of its gold as a stream to Sandstorm Gold Ltd. (SSL:TSX), which allowed it to get into production and get ahead of the curve for being a producer. Meanwhile, the operations have been profitable almost from the very beginning and that has now allowed SilverCrest to use internal cash flow to expand production as well as to develop its second project.

But just to show that it’s not just one kind of company we’re looking for, take Eastmain Resources Inc. (ER:TSX), a small, gold explorer in Québec. It has been exploring the Eau Claire project for years. Every time it steps out from the initial discovery, it is finding more gold. Eastmain’s strategy is to attract a midtier or a major to take that project out. It is not quite there, but all the elements are moving in that direction.

TGR: What’s the next catalyst for Eastmain?

TS: It needs to get the resource size and confidence to a level where potential suitors would start looking at acquiring the project—say 200,000 oz annual gold production over a 10-year mine life.

TGR: Is there a reason to believe that the size is there and it just hasn’t been delineated yet?

TS: Yes, that is why we consider Eastmain peerless. It keeps expanding. I would probably target 5 million ounces as its eventual size with most of that resource being at depth, but it is spread out and will take a while longer to fully delineate.

TGR: Any other peerless companies?

TS: Colorado Resources Ltd. (CXO:TSX.V)—this one is pure exploration with more risk. It recently discovered a copper-gold porphyry system in northern British Columbia near the Red Chris project of Imperial Metals Corp. (III:TSX). We like its relatively simple strategy of looking for obvious targets that no one has bothered to properly explore. In the case of copper-gold porphyry systems, this could mean something as simple as looking for rust-colored hills that haven’t been adequately tested.

TGR: The geology in British Columbia is conducive to hosting copper-gold porphyries and many have been discovered, but very few have been developed because critical mass is needed for that to happen. What makes this different?

TS: I would own Colorado Resources because it has made a copper-gold porphyry discovery. The grades in the first drill hole line up with world-class potential. It remains to be seen if that is just anomalous and it has one high-grade core and everything else is too low grade. That’s certainly a risk. The potential is there for multiple higher grade core zones or for the original core zone having dimensionality to support the type of large tonnage operation that could be successful in northern British Columbia.

It’s a peerless explorer. If it gets to the development stage we’ll have to use other factors to determine if it’s a peerless developer.

TGR: What are some prospective peerless companies?

TS: We keep our eyes on prospective peerless companies as they develop because we think they could have it in them to be successful. These are generally more risky, have some blemish or perhaps a past history that doesn’t scream quality or the highest level of investor confidence. Nonetheless, we think they could be on a path to becoming peerless.

An example would be Bear Creek Mining Corp. (BCM:TSX.V), a silver play in Peru. Its Santa Ana project wasn’t popular with the local population. It ended up getting taken back. It’s still trying to figure out the endgame on that one. But it has another project, Corani, a large, low-grade bulk silver project, that’s on the cusp of potential. The market hasn’t fully given Bear Creek credit for it. Of course, bulk low-grade silver projects don’t have a history of becoming fantastic profit-making machines. But the metallurgy, resource size, lead-zinc co-products and other factors seem to suggest that Corani can make it.

Endeavour Mining Corp. (EDV:TSX; EVR:ASX) is a project amalgamator focused on West Africa. It has some hardnosed, smart people behind it. A company like this will be judged on its operational success. Will it acquire projects where it can lower costs and generate outstanding profits? It seems to be on that path; we have to give it time.

Probe Mines Limited (PRB:TSX.V) in Ontario previously focused on chromite in the “Ring of Fire” area before switching its focus. I guess you could say that the company saw the writing on the wall, unlike some other unnamed parties.

Probe’s Borden Lake gold project is an example of potentially peerless. It is encountering higher grades and very distinct structures as it steps out drilling to the southeast. There’s an opportunity to look at this project as several different phases. It already has a several-million-ounce resource potentially open pittable that’s decent grade and now also has the potential for underground bulk mining that could make initial development easier because the project is next to a lake.

Projects near lakes have inherent risks. There’s a bigger focus on local stakeholders having a say, as witnessed by recent legislative developments in Québec. And of course across Canada over the last several decades, the First Nations have had increased input throughout the exploration and mine development process. It’s important to have a flexible strategy or options when a project is near something sensitive. However, the Borden Lake project is still in a stage where we don’t need to fully consider that.

I wouldn’t be buying Probe Mines because I think it’s going to be a great mine. I would buy it for the optionality and potential. It can still reach the next stage without having to solve issues that are important to local stakeholders. At the current stage, there’s just so much prospective upside from the discovery itself. As an explorer, I consider it a potentially peerless company.

TGR: Are there other interesting silver names?

TS: MAG Silver Corp. (MAG:TSX; MVG:NYSE) shares an excellent, high-grade polymetallic silver deposit in Mexico called Juanicipio with Fresnillo Plc (FRES:LSE). Unfortunately, the companies’ interests have not always been aligned historically. Fresnillo made a low-ball opportunistic offer to take out MAG Silver in 2008 that was rightfully rejected. This created some bad blood between the two companies.

Juanicipio is an attractive development prospect. But if each party has a different idea and they can’t somehow come to an agreement, then the project isn’t moving forward at a satisfactory pace for MAG Silver shareholders. If development progress suggests these issues are being left behind then MAG Silver would be on a path to being peerless.

And then there is Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE), a gold-silver producer in Mexico that we already consider to be peerless. It’s a well-run operation, a growth story that continues to be pretty hungry, and is possibly on the cusp of acquiring its next project with the intent of turning it into Fortuna’s third profitable mine.

TGR: Fortuna recently completed the first stage of expansion at San Jose. Is that going to dramatically change its cash flow?

TS: It’s going to improve the cash flow. The persistence of the gold-silver ore shoots continues at depth and along strike. The company has only been able to take the resource so far given that San Jose is a new mine, but the edges keep expanding as the drilling progresses. This creates a confidence boost for management. So sure, the expansion improves cash flow, but it also says management is confident enough in the deposit to go forward with such an aggressive expansion. I would argue that when management is confident and competent, shareholders can be confident as well.

TGR: People are quite interested in Trinidad North. What’s happening there?

TS: This is really interesting. This zone is a northern extension of San Jose. It was not explored historically because it was owned by another company. The known mineralization backed up right against the property boundary. Not only is the mineralization continuing, but it seems to be strengthening. Fortuna picked up the additional land and the subsequent drilling has demonstrated that.

TGR: Some companies begin prospecting with a program of community engagement to let the locals know their intentions and potential outcomes. Other companies prefer to avoid this and just get down to business. Is there any evidence that suggests investors are better served by one approach versus the other?

TS: We’ve looked at why companies fail to develop or continue on to development and one of the things that comes up is local stakeholder resistance. There are some cases where a company simply will not be able to mine in a particular area. There’s so much resistance to mining that it’s not going to happen. But in most areas, if a company faces a lot of resistance or has really strong opponents, it’s often because the company has not properly addressed the opposition.

TGR: What do you make of companies that are “high-grading,” which is mining the highest grade zones early on to pay back debt or get early profits?

TS: High-grading is just a way to pick the low-hanging fruit. Historically, where mining was very labor intensive, it was usually the only way to mine profitably. In modern mining, to attempt to recover the initial cost of the mine or pay off the project loan quickly, it’s almost necessary. I don’t find it very controversial.

What’s controversial is high-grading based on the metal price, which I actually think has some merit. Companies should high-grade when prices are near historic lows and highs. When prices are stable, they should mine the design grade.

The reasoning is pretty obvious and simple. When prices are high, deliver as much metal through the plant as possible in order to build up your cash position. When prices are really low there’s usually no other option. If a company doesn’t go after the highest grades or the most prospective portion of the mine, it may have to shut down.

An extension to that, for example, would also be locking in a price spike via short-term hedging. When silver prices momentarily reached $50/oz, it would have served the silver producers very well to lock in the price on a quarter or two of production yet none of them did that. They could have generated millions in additional cash flow with minimal risk.

TGR: Could you leave our readers with a tidbit of insight that could serve them well this autumn?

TS: I would caution your readers to be aware of where we are in the market cycle and what type of companies they want to own and why. In a situation where not all boats are rising, only a select few are going to succeed. In this environment, investors need to have some growth stories. I don’t think investors are going to be well served for the time being by simply investing in companies that are sitting on huge low-grade deposits but aren’t doing anything to expand their potential, increase production or acquire projects to grow. There may be times when the companies with the biggest resource are the ones to own, but not now. Investors have to match strategy with the market reality.

Investors should also be aware of what stage the company is in. Unless investors are going to own an explorer from the first drill hole to production, there are factors investors probably don’t need to worry much about early on. An investor should care about the factors that the market cares about while the investor owns the stock. This is pretty controversial and I suspect many investment professionals would have a problem with such a cynical approach.

Conversely, I think most retail investors will probably say, “No, this is too hard to do. You should really just look at the big picture.” From my perspective, that shuts investors off from a lot of great opportunities (and exposes them to a few lousy ones). If investors are able to segment the holding period of their portfolios and match positions to a specific investment thesis, they can increase their odds of success.

TGR: Thanks for your time today, Tom.

TS: My pleasure.

Tom Szabo is co-chief analyst of Metal Augmentor, an investment research service focused on metals and mining. Szabo has co-founded several precious metal related businesses and investment funds.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

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: Cayden Resources Inc., SilverCrest Mines Inc., Colorado Resources Ltd., Probe Mines Limited, MAG Silver Corp. and Fortuna Silver Mines Inc. Goldcorp Inc. is not affiliated to Streetwise Reports. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Tom Szabo: 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: Cayden Resources Inc. and Eastmain Resources Inc. 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 number one problem of the last two weeks didn’t get a solution yet so the partial government shutdown stays in place as talks between the White House and House Republicans have entered in deadlock during the weekend. The 17^th of October’s deadline is close and the government doesn’t have an agreement. As a matter of fact, the American Government seems to be comfortable with taking decision in the last moment so everybody is expecting the 17th of October in order to see a solution added to this tense situation.

The representatives of IMF and the World Bank, which have been holding a meeting until today, warranted about the necessity of reaching an agreement, as a possible negative scenario would “seriously damage” the global economy.

Today, the discussions started again even if the weekend gave the impression that an agreement is still far from their negotiations. President Barack Obama is discussing with congressional leaders of both parties and are trying to find the middle way of approaching the automatic spending cuts. Republicans are reminding about the sequester, which is due to take effect at the beginning of 2014 and are strongly arguing against it while the Democrats highlight its positive results, as the federal expenses have been decreasing.

The last meeting started to reflect more optimism, as it should in the last moment, and officials are positive about closing an agreement before Thursday. Finding the most appropriate way of keeping borrowing money and avoiding a global shutdown, which will have a cascading effect, requires a couple of days more.

As the effects of the 3^rd of August 2011’s last government shutdown threat are still visible, speaking about the Budget Control Act implemented by President Barak Obama which is still activating by the so called sequestration, we see now again the American Government in standstill. To question is the decision that is about to be taken and how officials will present the positive side of the situation in order to give the impression that everything is running smoothly.

The post U.S.’ Government Shutdown – The Countdown Started! appeared first on investazor.com.

By www.CentralBankNews.info     Global monetary policy rates rose in September for the first time in almost two years in a sign that the trend toward lower interest rates may have ended as a handful of central banks in emerging markets and other countries tighten policy in response to growing inflationary pressures, in some cases fueled by currency depreciation.
    The Global Monetary Policy Rate (GMPR) – the average policy rate of the 90 central banks followed by Central Bank News – rose to 5.59 percent in September from 5.58 percent in August, breaking the trend of declining rates every single month since November 2011.
    After slashing rates from late 2008 through 2010 in response to the global financial crises, central banks started to tighten policy in early 2011 as the global economy responded to government stimulus and extraordinary accommodative monetary policy, including asset purchases or quantitative easing.
    But confidence that the global economy finally was on a self-sustaining path was soon undermined by the lethal combination of the devastating earthquake and tsunami in Japan in March 2011, the euro area’s sovereign debt crises and political wrangling over the U.S. debt ceiling.
    The response was fresh rounds of asset purchases by those central banks that were already at the zero bound – the U.S. Federal Reserve, the Bank of England and the Bank of Japan – and rate cuts by other central banks, including Brazil, Turkey, Thailand, Sweden, Norway, Indonesia, Israel, and the European Central Bank, which also launched two rounds of longer-term refinancing operations
    The rise in global policy rates in early 2011 was thus quickly reversed and since November 2011 global rates have been falling. In January 2012 GMPR was 6.52 percent and ended the year at 5.92 percent as the euro area’s recession dragged on and overall global economic growth was sluggish.
    This trend of falling policy rates remained firmly in place through 2012 and early 2013. But since May this year global financial conditions have tightened  in response to expectations of a turning point in the Federal Reserve’s policy stance, signs of economic rebound in advanced economies and a stabilization in emerging markets, including China.
    During September five central banks raised policy rates – India, Indonesia, Pakistan Uganda and Bulgaria – for a cumulative rate rises of 201 basis points.
   India’s rate rise to limit inflation was combined with a cut to its marginal standing facility rate to reverse July’ exceptional measures taken to defend the embattled rupee. Indonesia also raised its rate to push down inflation and stabilize its rupiah while Pakistan and Uganda took aim at inflationary expectations.
    Meanwhile, six central banks cut rates – Mexico, Israel, Egypt, Hungary, Romania and West African States – for gross cuts of 170 basis points, the lowest monthly total this year.
    Mexico surprised financial markets by cutting its rate to boost economic growth, Israel cut in anticipation of slower global growth and a rise in its shekel, Egypt cut to stimulate activity undermined by political turmoil, Hungary continued its easing cycle, Romania responded to lower inflation and the West African States cut to head off the risk of slower economic growth.
    The end result was that GMPR rose by a net 31 basis points in September, the first time this year that rates rose on a monthly basis. But taking a step back and looking at the first nine months of the year, policy rates have been cut by a cumulative 43.30 percentage points and only raised by 11.50 points, illustrating how loose monetary policy has been.
    Whether September heralds a definite nadir in policy rates is unclear at this point. The Federal Reserve’s timeline for winding down its asset purchases has been pushed back and it’s too soon to gauge the impact on the U.S. and global economy from the political debate surrounding the U.S. debt ceiling and federal budget that has led to a U.S. federal government shutdown.

London Gold Market Report
from Adrian Ash
BullionVault
Mon 14 Oct 09:05 EST

PRECIOUS METALS rose Monday morning in London, with gold recovering more than $20 of last week’s $50 drop to trade at $1287 per ounce as world stock markets fell ahead of this week’s technical default by the US government.

Silver outpaced the rally in gold, adding 1.5% by lunchtime in London.

 “Although a default would clearly be bullish for gold,” writes Jonathan Butler at Japanese conglomerate Mitsubishi, “the US is very unlikely to breach the debt ceiling.

 “The coming days could see prices drift lower as the resolution of the crisis prompts a rally in risk assets and a move out of gold.”

 Senate Democratic leaders yesterday refused to agree a short-term deal to avert Thursday’s debt-ceiling deadline only by locking in budget cuts for 2014, the New York Times reports.

 Failure by the US to honor its obligations “would mean massive disruption the world over,” said IMF managing-director Christine Lagarde. “We would be at risk of tipping yet again into a recession.”

 Dropping as low as $1264 per ounce on Friday on suddenly heavy volume in US gold futures, gold today “[saw] some quite good physical demand,” Bloomberg quotes Bernard Sin at Swiss refining group MKS, refering to wholesaler buying in Asia.

 Amongst Western investors, however, the SPDR Gold Trust shed another 9 tonnes of bullion during last week’s drop in gold prices, taking the quantity needed to back shares in the largest gold ETF to a new 56-month low of 891 tonnes.

 Going into last week’s expiry, SPDR options contracts were concentrated Friday in $124 and $122 puts, according to Reuters data.

Having been out of the money all week, those put options – which gave holders the right to sell SPDR shares at those prices – gained value during Friday morning’s sharp plunge, with the ETF’s shares falling to touch that lower level before ending the week at $122.60.

In Comex gold futures, says ANZ Bank in a note, “It is difficult to gauge the extent of speculative positioning” because the weekly CFTC regulator’s Commitment of Traders report is missing thanks to the US government shutdown.

But “open interest has been rising,” says Standard Bank’s commodities team. “Combined with a declining price, would suggest that new short positions had been added.”

Over in India and China meantime – the world’s top two physical gold buyers – new data showed consumer-price inflation in both countries rising to 7-month highs in September.

 Now at 3.1%, “The rise of [China’s] CPI inflation leaves little room for policy easing [ie, interest rate cuts to spur the economy] as the benchmark deposit rate is only 3%,” says Nomura’s chief China economist in Hong Kong, Zhiwei Zhang.

 Gold bullion refineries in India are running at just 25% of capacity, according to industry figures. Because the government’s strict anti-import measures, plus falling gold prices domestically, mean they cannot source feedstock to meet the current festive-season demand.

 Last week’s drop in SPDR gold holdings coincided with a drop of 120 tonnes in the world’s largest silver ETF, the iShares Silver Trust.

 Shedding metal to back its shares at the fastest pace since May, the SLV only retreated however to a 3-week low at 10,505 tonnes.

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

By www.CentralBankNews.info     Russia’s central bank held its new policy rate, the “key” rate introduced last month, steady at 5.50 percent, saying it expects inflation to continue to slow down this year and decline further in 2014, but “nevertheless, more pronounced downward trends in inflation expectations need to be formed to ensure the achievement of inflation goals in the medium term.”
    The guidance by the Bank of Russia, which has held its policy rates steady since September 2012, indicates that it is close to cutting rates to stimulate the economy but wants to be absolutely sure that inflation remains within its 5-6 percent range.
    The central bank’s decision was largely expected after the bank’s governor, Elvira Nabiullina, said last month that the likelihood was strong that borrowing costs would be kept unchanged if current trends were sustained.
    Russia’s central bank gave a largely downbeat assessment of the economy, saying the pace of economic growth remains low, with subdued production activity and investment demand, and a continued deterioration of producer confidence.
    Consumer demand and retail lending growth remain the major economic drivers but while gross output is expected to remain below its potential level, the bank does not expect a major widening of the negative output gap.
    “Given subdued investment activity and sluggish recovery of external demand, the Bank of Russia expects the economic growth rate to remain low in the medium term,” it said.

    Russia’s Gross Domestic Product contracted for the second quarter in a row, falling 0.26 percent in the second quarter from the first for annual growth of 1.2 percent, down from 1.6 percent.
    Russia’s inflation rate, which has been declining since hitting a 2013 high of 7.4 percent in May, fell to 6.1 percent in September. This trend continued in the beginning of October and as of Oct. 7 the inflation rate had eased further to 6.0 percent, the Bank of Russia said.
    “The absence of significant demand-side inflationary pressure in the conditions of gross output staying slightly below its potential level is one of the factors behind the decline in core inflation in recent months,” the bank said, adding that core inflation was steady at 5.5 percent in September.
    Based on an expected improvement in food market conditions due to a favourable harvest, the central bank expects inflation to stay within its target range until the end of this year and if “current macroeconomic tendencies continue, inflation is projected to decline further in 2014.”
    At its meeting last month, the central bank’s board of directors took a major step forward in its move towards an inflation-targeting regime in February next year by adopting its one-week rate on repo and deposit auctions as its key policy rate within an interest rate corridor that has a ceiling of 6.50 percent and a bottom of 4.50 percent on one-day rates for liquidity provision and absorption.
    The bank said this new key rate would become the main policy instrument from Feb. 1, 2014 when it stops conducting one-day repo auctions on a daily basis and starts using 1-6 day repo auctions as a way of fine-tuning its liquidity operations.
    The previous policy rate, the refinancing rate, was maintained at 8.25 percent.

    www.CentralBankNews.info

By The Sizemore Letter

I love peeking over the shoulder of successful investors.  It’s not so much a matter of seeing what they are buying and selling as much as it’s seeing what they are thinking.   You’re always at an information disadvantage when you watch the trades of hedge fund guru; you’ll never know exactly why they placed the trades they did or what their expected returns or time horizon are.  But you can get a pretty good idea of what their overriding investment themes are.

You can follow these trades by reading the publically-available 13F filings they are required to report to the SEC.  Or, you can use one of many services that compile and crunch this data for you.

Today, I want to draw your attention to a “guru heat map” produced by Guru Focus: See Guru Buys and Guru Sells.  These heat maps aggregate all insider buying and selling of S&P 500 stocks and rank them accordingly.

A few things jump right off the page.  Microsoft (MSFT) has become a battleground stock among gurus; it is the most aggressively sold by gurus, but is also in the top 20 of top buys.  Apple (AAPL), Google (GOOG), Qualcomm (QCOM), Cisco Systems (CSCO), Berkshire Hathaway (BRK-B), Wells Fargo (WFC) and CitiGroup (C) also feature prominently in both lists.  It’s hard to draw conclusions when rock star investors are simultaneously buying and dumping the shares.

Not all stocks had ambiguous guru activity, howver.  Oracle (ORCL) was the most heavily bought stock by gurus, with 16 individual gurus identified by Guru focus, and it was not in the top 50 of those sold.

A less common name being accumulated by gurus is Cabot Oil and Gas (COG), which had 7 recent guru buyers and no major selling.

While I don’t recommend you run out and buy or sell a stock based on its guru buying patterns, I recommend you periodically visit the guru heat maps.  Tools like this can be a useful starting point in your investment process.  When entering a trade, it’s nice to know whose in it with you…or who might be taking the other side.

Charles Lewis Sizemore, CFA, is the editor of the Sizemore Investment Letter and the chief investment officer of investments firm Sizemore Capital Management. As of this writing, he was long MSFT and CSCO. Click here to learn about his top 5 global investing trends and get your copy of “The Top 5 Million Dollar Trends of 2013.”  This article first appeared on TraderPlanet.

This article first appeared on Sizemore Insights as When Gurus Clash: Using Guru Trading Data

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By Michael Lombardi, MBA for Profit Confidential

The stock market…a place where rationality has been thrown out the door in favor of trading for immediate profits…profits based on what the government and Federal Reserve are planning to do next. It’s no longer a place for average investors to make money, as the fundamentals that drive key stock indices higher don’t really matter anymore. The notion has become “If it’s good news, buy! And if it’s bad news, then buy even more!”

We have been witnessing this phenomenon on key stock indices for a while now, and from my experience, such erratic behavior by the stock market usually comes at the end of a long up or down cycle.

Congress had decided to “kick the can” of U.S. debt down the road a little longer. When news broke last Thursday that they were planning to increase the U.S. debt limit for a few weeks and then come back to debate it, key stock indices had the best day of the year. Look at the circled area in the chart below:

Chart courtesy of www.StockCharts.com

Hold on a minute!

Why did the S&P 500 jump so much on the Republicans saying they would put in a temporary new U.S. debt ceiling instead of debating it? Isn’t increasing the U.S. debt load bad? After all, we are the biggest debtor in the global economy.

Dear reader, this is the new norm on key stock indices. The bad news, meaning we will have higher U.S. debt, is taken as good news by key stock indices. And assets that should be increasing in value are actually being punished. Case in point: gold bullion prices.

On a very basic level, I question all of this because it doesn’t make much sense anymore. The euphoria has gotten to the point where all the stock market cares about is making sure the government keeps on with its reckless spending ways and that the Fed keeps printing money. In the long-term, we will pay dearly for this kind of thinking.

So, we’ve come to a point in the line where the stock market is only marginally dependent on the economic fundamentals (and the earnings growth of the companies that trade in it) and more focused on greater debt creation and continued paper money printing. This is not a good sign, and it cannot go on forever; hence, you can see why I remain so cynical and skeptical about key stock indices.

Michael’s Personal Notes:

No one wants to hear this…

The most basic factor of economic growth in this country, consumer spending, is flashing a warning sign about the U.S. economy.

According to Gallup, weekly U.S. economic confidence for the week of September 30 to October 6 plummeted the most since the Lehman Brothers’ fall in 2008. The index suggests consumer confidence is down significantly since mid-September, and it now stands at the lowest level since December of 2011. (Source: Gallup, October 8, 2013.)

Unfortunately, Gallup’s confidence index is not the only indicator suggesting consumer spending is plummeting. The Thomson Reuter/University of Michigan’s preliminary consumer sentiment index for October declined to 75.2 from 77.5 in September—the lowest figure since January of this year. (Source: Reuters, October 11, 2013.)

And companies that are dependent on consumer spending are seeing a downtick in sales. Take The Gap, Inc. (NYSE/GAP), for example. The company reported a decline of three percent in same store sales for the month of September. In the same period a year ago, the company’s same store sales were up three percent! (Source: The Gap, Inc., October 10, 2013.)

I’m not shocked at all when I see statistics that show consumer spending is getting weaker and weaker. In fact, I have been writing about this issue for a while. Consumer spending in the U.S. economy is in jeopardy—all the indicators are suggesting we have more chances of seeing it decline than seeing a robust move to the upside.

And that brings me to the essence of today’s message: Retailers in the U.S. economy are not going to have a robust holiday season. Even if we are able to see some increases in consumer spending, it will be because of deep discounts being pushed by retailers—the same scenario we saw played out during the back-to-school shopping season.

What’s next?

Our economy is based on consumer spending, accounting for about two-thirds of U.S. gross domestic product (GDP). Those who are hoping for a turnaround in the U.S. economy have to really think again.

What He Said:

“You’ve been reading my articles over the past few months and have seen how negative I’ve become on the U.S. economy. Particularly, I believe it’s the ramifications of the faltering housing sector which is being underestimated by economists. A recession doesn’t take much to happen. It’s disappointing more hasn’t been written on the popular financial sites and in the newspapers about the real threat of a recession happening in 2007. I want my readers to be fully aware of my economic opinion: I wouldn’t be surprised to see the U.S. economy in a recession sometime in 2007. In fact, I expect it.” Michael Lombardi in Profit Confidential, November 13, 2006. Michael was one of the first to predict a U.S. recession, long before Wall Street analysts and economists even thought it a possibility.