Month: January 2014

By MoneyMorning.com.au

What was yesterday’s big news? China’s economic growth.

The market expected bad news.

That’s why the S&P/ASX 200 index fell as much as 43 points during the day.

So, what happened?

It turns out the news was better than the market had expected.

After that came out the market turned course and went up. It ended the day down just 10.9 points.

So much for the idea that the market is living in cloud cuckoo land with too-high expectations. In fact, is it possible that investors are being unduly pessimistic and undervaluing stocks?

As always, you can never know for certain if stocks are undervalued, fairly valued or overvalued until after the event.

What seems expensive today may turn out to be cheap tomorrow if stock prices continue to rise and if company earnings follow suit.

That’s a key point. We’ll come back to that in a moment.

You’ve doubtless heard talk everywhere claiming that stocks are currently in a bubble. But what’s the rationale for that reasoning? That stock prices in the US have gained 170% since the 2009 low.

Likewise, many say Australian stocks are overvalued because the index is up 68% since the 2009 low. Let’s put things in perspective; as far as stocks are concerned there’s no way that anyone can reasonably call the current gains a bubble.

Not All Price Rises are Bubbles

Look, we’re not saying that stocks aren’t heading towards bubble territory. If you’ve read Money Morning at any point over the past five years you’ll know we’ve long warned about this gradually building bubble caused by low interest rates and money printing.

But it’s not there yet.

If you’re looking for a real bubble, look at the dot-com bubble. The NASDAQ index climbed 1,071% from March 1990 to March 2000. If Mick Dundee were comparing the two he’d probably say, ‘That’s not a bubble. THAT’S a bubble.’

We will point out one thing. Just because stocks go up – sometimes a lot – it doesn’t necessarily mean it’s a price bubble. It’s possible for prices to rise and for it to be entirely justified.

Diggers and Drillers resource analyst Jason Stevenson sent your editor a note in response to yesterday’s Money Morning. It was a quote in the Wall Street Journal from Jason Hsu, chief investment officer at Research Affiliates:

‘When everyone starts to use “bubble” anytime prices go up, it’s probably not one. The time to worry is when people are using all kinds of rationalizations as to why it’s not a bubble.‘

Hmmm. Does that mean it is a bubble because we’re claiming it isn’t yet the top of the bubble? Are we using ‘all kinds of rationalizations‘ to justify our position?

Well, that’s up to you to decide. We just give you the financial advice to buy stocks to take advantage of a rising stock market. As a self-directed investor it’s then up to you to decide if our argument makes sense…or whether we’re talking junk.

Current Valuations ‘Cheap’ Compared to Bubble Valuations

Of course, we should make something else clear. Just because stock prices haven’t yet reached bubble proportions, doesn’t mean prices can’t fall.

Stocks rise and fall all the time. The issue is whether the price rise far exceeds anything that could possibly be justified by future earnings growth.

Even if stock valuations are high relative to historical levels, you have to decide whether they are so high that it’s fair to say the market is at the peak of a bubble.

The following chart details the average price to earnings (PE) ratio of the S&P 500 from 1871 to the present day:

Source: www.multpl.com
Click to enlarge

(Note: The data prior to 1957 is estimated data. The S&P 500 didn’t exist until 1957.)

We’ll agree that the PE ratio is towards the top of the average range. But as you can see, for a comparison to the dot-com boom and sub-prime boom, it’s plain to see current valuations are well below those bubble valuations.

Again, we’re not saying stock prices can’t or won’t fall. But the current market appears to be far from bubble territory…for now.

It All Depends on Investor Confidence

Finally, we’ll make one last point. It’s something we referred to at the top of this letter.

It’s the idea that what may look like an expensive stock valuation today may not look so expensive a year or two from now. In fact, by then today’s stock prices could look cheap.

That can happen in one of two ways. Either companies announce better-than-expected profits, or investors become more positive about future company profits.

Look at the chart of PE ratios again. You can see how that’s played out in the past. If investors gain more confidence they’ll pay more for a stock in the belief that profits and prices will go higher.

Look, let’s get something straight. The whole period from 2009 is part of a major asset bubble. We get that, and we’ve openly warned you about it.

But just because we or others are supposedly smart enough to spot a bubble, doesn’t mean asset prices won’t go even higher. Price bubbles through history have a funny habit of going much further than most expect.

And right now, while the US market in particular may have clocked up good returns since 2009, we don’t think it’s anywhere near reaching a bursting point.

In fact, it may still be many years before the bubble reaches that point. In the meantime, it’s important you don’t miss out on the potential gains if this market continues to rise.

Cheers,
Kris+

By MoneyMorning.com.au

By MoneyMorning.com.au

An interview with Paul van Eeden, founder of Cranberry Capital

Ed Note: The following is part one of an interview with Paul van Eeden, president of private holding and investment company Cranberry Capital Inc., and is well known for his work on the relationship between the price of gold and currency markets. Tune in tomorrow for part two.

The Daily Reckoning: Let’s dive right into the price of gold. Gold had a rough year in 2013 – hitting a low $1,178. Are you surprised by gold’s recent performance?

Paul van Eeden: No, I’m not surprised at all. I think even at $1,230 gold is still expensive. And it wouldn’t surprise me in the least to see gold go down another few hundred dollars. But I have to be very careful because I don’t try to predict what the price of gold is going to do in the next six months or a year. I pay attention to what I think gold is worth, because if the price’s higher than what I think its worth, then I have very little interest in buying gold specifically. If it trades for less than what I think it’s worth, then I’m more inclined to buy it – without paying attention to the timing. I don’t mind buying assets if they’re trading below intrinsic value and holding onto them; I don’t mind buying more if they continue to decline. But I try not to buy assets when they’re trading for more than what I think they’re worth, regardless of what I think is going to happen in the next three-six months.

The Daily Reckoning: Building on that, how, exactly, do you figure out what gold’s intrinsic value is?

Paul van Eeden: The basic premise is the fact I think gold is money. And I analyse it as if it’s money. Whenever you talk about the price of something, whether it’s gold, or a Mercedes-Benz, or a widget – it doesn’t matter what you’re talking about – the minute that you denote something as a price, then you’re making a comparison between two different things. You’re comparing a Mercedes against a bunch of US dollars. The minute that you express something as a price, you’re analysing two things.

To make it very clear, if I tell you I think the value of a Mercedes-Benz is going to go up in the next four years, I might mean that I think Mercedes are becoming scarce, and therefore its value is going to go up. Or I might mean I think the value of the US dollar’s going to go down, and therefore the Mercedes-Benz is going to retain value better than the dollar. Both have the same effect, but they mean very different things.

The minute you start talking about the gold price, it means you also have to understand what you’re pricing it in. In this case, most people price it in US dollars. So you cannot start an analysis of gold without first analysing the US dollar. So I’ve spent a lot of time and effort trying to figure out how the dollar’s intrinsic value changes over time.

My own view is that a currency’s intrinsic value declines proportional to its inflation rate. We have to be very careful here because a lot of people, when you talk about inflation, think about price changes – or price inflation. When I talk about inflation, I’m talking about monetary inflation, changes in the money supply. So my belief is that a currency’s intrinsic value declines in proportion to an increase in the money supply.

If that’s the case, then whenever I want to think about the changes in value of gold relative to the US dollar, I have to take into account the change in the intrinsic value of the US dollar as a result of US monetary inflation, the increase in US money supply. But I also have to take into account the change in the intrinsic value of gold as a result of the change in the gold supply.
If gold is money, then its intrinsic value will decline as the supply of gold increases. So you have to know what the US money supply is and how does it change from year to year. You also need to know what is the gold supply, and how does that change from year to year. So by looking at the change in the US money supply and the change in the gold supply over the last 100 years, I’ve come up with a chart that gives me the change in the intrinsic value of gold vis-a-vis the US dollar over the last 100 years, purely and simply as a result of the relative inflation rates of the two currencies.

Click to enlarge

And based on that, I think gold’s probably worth about $1,000 an ounce right now in US dollars.

It was worth about $913 last year, and it should be about 5% higher this year. Call it $960 – could be a little bit higher – but it’s close to $1,000 an ounce. That’s accurate enough for most purposes.

The Daily Reckoning: Do you think that gold will, in fact, decline to that level?

Paul van Eeden: This is where I always find people misinterpret what I’m trying to say. I’m saying that in my opinion, I think gold is worth $1,000 an ounce. I’m not saying that gold is going to decline in price to $1,000 an ounce. I have no idea what the gold price is going to do. The gold price might decline to $700 an ounce. It might turn around and go back up to $1,800 an ounce. I have absolutely no idea.

What I do know is if I think it’s worth $1,000, I’m not going to buy it when it’s $1,200 an ounce. If the gold price declines below $1,000 an ounce, I’ll be inclined to buy some – not because I think it’s going to go up, but because I think it is underpriced. If gold continues to decline, I’ll buy more, again without any consideration for when the price of gold is going to go up, merely as a function of the fact I think the value of gold vis-a-vis the dollar goes up steadily from year to year.

And let’s say in theory, hypothetically, it goes up by, say, 4-6% a year. Let’s average that out and say every year it goes up about 5%. Well, if I can buy gold at a 10% discount to its value and it increases at 5% a year, and I keep holding it, eventually I’m going to be doing OK. But if I buy it at a premium to what I think it’s worth, even if it continues to appreciate in value against the dollar, I might actually lose money, depending on how large that premium is.

The Daily Reckoning: That’s an important distinction. Finally, to wrap up…would you explain what measure of the money supply you use for our readers? You call it the ‘Actual Money Supply’, correct?

Paul van Eeden: Yes, my measure of money supply is very simple. It’s the actual amount of money that’s in the economy and available to the economy. So in other words, it’s notes and coins. We all use notes and coins, all the money supply measures use notes and coins. It includes all of your bank account deposits – your checking account, your savings account, your term deposit account. I’ve never met anybody who believes the money they have in their savings account isn’t money or isn’t theirs or they cannot spend it. Similarly with term deposits. So I count all those things. But I don’t count anything else. I don’t count money market mutual funds, I don’t count other financial instruments, because they’re not money, they’re assets. And most other measures of money supply include items that are not money, but are assets.

The Daily Reckoning: Thanks very much, Paul. That’s a good place to stop today. Tomorrow, we’ll continue with Part Two of our interview and get your opinion on why the ‘gold to the moon’ scenario hasn’t played out over the past five years.

Paul van Eeden is president of private holding and investment company Cranberry Capital Inc., and is well known for his work on the relationship between the price of gold and currency markets. Originally from South Africa, and having been intimately involved in the financing and evaluation of resource companies, he has an insider’s understanding of mineral exploration. Van Eeden is a frequent speaker at investment conferences and a regular guest on radio and television.

Ed Note: The above article was originally published in The Daily Reckoning America. Tune in tomorrow for part two.

By MoneyMorning.com.au

By CentralBankNews.info

• Japan out of deflation, no guarantee it won’t return: economy minister (Reuters)
• Vergara says data paving the way for further Chile rate cuts (Bloomberg)
• N.Z. inflation accelerates, boosting case for rate rises (Bloomberg)
• BOC Preview: 1.0% policy rate to continue Wednesday (MNI)
• Unwinding of stimulus need not hit economy, assets: BOE study (Reuters)
• Sri Lanka may keep rates steady in coming months, Cabraal says (Bloomberg)
• Nomura predicts Korea rate rise in split with Goldman (Bloomberg)
• Riksbanker Floden signals rate cut next month unlikely to happen (Bloomberg)

By CentralBankNews.info

• Crunch time for Turkey’s central bank as rate hike pressure mounts (Reuters)
• Traders look to Bank of Canada rate announcement (CP24)
• China central bank injects cash into big banks as rates spike (Reuters)
• Thai policy rate may be trimmed to 2%, but timing not known (The Nation)
• Brazil analysts forecast tighter monetary policy as prices rise (Bloomberg)
• Naira to remain anchor as options narrow for next Nigeria governor (Business Day)
• Fed offls: FOMC apt to extend tool enabling rate hikes (MNI)
• BOE ‘likely to delay interest rate rise over wage growth fears’ (The Telegraph)
• RBI to review policy with possibility of holding rates (DNAIndia)
• India struggles to define inflation (WSJ)
• NZ inflation seen tame enough to keep rates unchanged till March (Business Desk)
• Banks to return 991 m euros of crises loans to ECB next week (Reuters)
• Bangladesh CRR, SLR go under new procedure from Feb. 1 (Financial Express)
• OECD chief economist says bond buying best option against deflation (WSJ)
• Taming bubbles is hard, but central banks can try: Dallas Fed paper (WSJ)
• Flug nominates Canadian-born economist as Bank of Israel dep. Gov. (Haaretz)
• Kenya central bank team to probe high interest rates (The EastAfrican)

Source: Brian Sylvester of The Gold Report  (1/20/14)

http://www.theaureport.com/pub/na/the-longwave-winter-of-ian-gordons-discontent

As the Fed runs low on ammunition to further suppress the gold price, Ian Gordon, founder and chairman of the Longwave Group, is extremely bullish on gold. In this interview with The Gold Report, he recounts his history of the manipulation of the gold price and its implications for the global economy. He also expands on research showing that juniors are more effective and cost efficient at making discoveries.

The Gold Report: Gold was among the worst performing assets in 2013. How have its trading patterns and performance over the last two years informed your predictions for 2014?

Ian Gordon: I’m extremely bullish for the gold price in 2014. Part of that bullishness is related to my work on cycles. Indeed, I am confident that 2014 will see the beginning of the 4th long-term cycle for precious metals and precious metals stocks and the bullish phase of this cycle should last about three years.

The prices of precious metals and precious metals stocks have been badly bruised following their price peaks in 2011, due in part to what I consider to be manipulation in the COMEX. There is a long history of gold price manipulation: In the 1960s, the London Gold Pool was formed to try to hold the price at $35/ounce ($35/oz)—the price the U.S. dollar was pegged to—because gold was leaving the U.S. The London Gold Pool lasted for six years, at which point it became impossible to maintain the $35/oz price and that effectively forced the U.S. off gold in 1971. In the 1970s, the gold price rose, eventually reaching $800/oz in 1980. In an attempt to contain the rising gold price, the International Monetary Fund and the U.S. sold gold during the late 1970s. In 1999, the price of gold bottomed at $250/oz, then started to bubble up.

As the price of gold started to rise, the U.S. inveigled countries like Canada, the United Kingdom and several others to sell their physical gold, in an effort to contain the price. When those overt gold sales failed to stop the price from rising, Western central banks moved to gold leasing. That was done so funds that were borrowing the gold could sell it to suppress the price. That came to an end when there was no more gold to lease, perhaps evidenced by the fact that U.S. cannot return just 300 tons of gold to Germany.

The final battlefield for the U.S. war on gold is being waged in the COMEX. Gold was down $480/oz during 2013, and on two days in April, it was down $246/oz, which is more than half the total drop in the gold price for all of 2013. The ratio on the COMEX of paper gold to physical gold is now effectively 100:1.

It seems to me the U.S. is running out of ammunition to suppress the price of gold, to convince people that the paper dollar is better than gold. All the physical gold has been moving to Asia. The war will end in 2014. The manipulation will be exposed for what it is. When that happens, the gold price will rise dramatically.

TGR: Is there any evidence that gold’s previous price performance can be used to forecast its future performance, or are we in uncharted territory?

IG: Whenever we have manipulation in markets it becomes much more difficult to make forecasts. For example, the stock market is being driven higher through massive monetary stimulus on the part of the central banks, particularly the Federal Reserve.

Our research demonstrates that cycles of secular bull and bear markets occur within what we call the longwave cycle seasons. We are now in the winter of the longwave cycle, when debt is effectively taken out of the economy. The central banks are resisting that process and have been since 2000. During the winter of the longwave season, gold is in a secular bull market and stocks should be in a secular bear market.

We’ve been in a secular bull market for gold and the gold stocks effectively since 2000. The HUI Gold BUGS Index bottomed at $35.50 in 2000; today it’s just above $200. The gold price bottomed at $251/oz and today is above $1,225/oz. Within these secular cycles there are long-term and intermediate cycles. Long-term cycles last between four and five years and there are four and a half of these long-term cycles in each secular cycle. I have written about how these cycles fit together; this can be seen on mywebsite.

We should be in a price bottom of the 3rd long-term cycle and beginning the bullish phase of the 4th long-term cycle for precious metals and precious metals stocks. In my cycle work I have estimated that this bullish phase should take the price of gold to $3,300/oz and the HUI Index to $990 sometime early in 2017. It won’t be straight up; there will be intermediate corrections along the way.

TGR: Is 2014 the year that the financial system crumbles?

IG: I’m absolutely convinced that will happen this year. According to our cycle work, we’re in a currency crisis very much akin to the crisis of the last longwave winter during the 1931–1933 global currency crisis. I believe we will see world currencies fail this year. The euro and the dollar are going to be in jeopardy.

Out of that, a new world monetary system will evolve, much as it did at Bretton Woods in 1944. This will be a very difficult process as people lose faith in fiat paper currencies and turn to gold and silver.

TGR: Some people argue that this apocalyptic gold narrative does nothing to help gold stocks and gold investors. How do you respond to that?

IG: I think that is ridiculous. The world is facing an unprecedented fiat paper money currency crisis that can only end very badly. I know that gold goes up in the longwave winter as it did after 1929, and before that, after 1873. The price of gold rises because people no longer trust paper money.

The paper money fiasco is getting out of hand. France and Italy are teetering. When they collapse, it will be very difficult to keep the euro functioning as a currency.

I’m confident that the gold bull market is nowhere near over because in times of crisis gold becomes the money of choice. As I have already said, we are facing a mammoth crisis.

TGR: In a December 2013 issue of That Was the Week That Was, you noted some points made by Richard Schodde of MineEx Consulting when he compared the performance of juniors and seniors in mineral exploration in Canada and elsewhere since 1960. What were some of his findings?

IG: I think the most important thing we can take from his analysis is the importance of the junior companies in the exploration field. Between 1960 and 2012, 46% of the largest discoveries were made by junior companies. The juniors also were much more efficient than their senior counterparts in making those discoveries. It cost the juniors far fewer dollars to make discoveries similar to those made by the seniors.

TGR: If gold stays at around $1,200/oz, Schodde expects about $1.3 billion ($1.3B) to be spent annually on exploration in Canada. You help exploration companies arrange financing. How did 2013 compare with 2012 in that regard?

IG: Both were difficult years. Many junior mining companies are fighting just to survive. Toronto, the principle financial hub for the mining sector, was to a large extent put out of the financing game because the gold funds were experiencing significant redemptions and had to sell positions to make those payments. There was no money for financing.

I’ve noticed that Europeans and Americans along the eastern seaboard remain pretty active in financing the juniors. Europeans understand gold and they understand that paper currencies are in serious trouble.

I suppose my biggest contribution to financing last year was helping Barkerville Gold Mines Ltd. (BGM:TSX.V) raise a $15 million ($15M) gold loan through Eric Sprott.

TGR: Barkerville had issues crop up in 2012 that carried through 2013. Have they been resolved?

IG: Yes. The British Columbia Securities Commission lifted the cease-trade order on the company in 2013.

There were 14 months when the company could not raise capital, but continued to spend money. Snowden Mining Industry Consultants was brought in to do a new NI 43-101. That took time, but the numbers are not hugely different from the numbers that Peter George and Geoex originally came up with. The capped resource is 5 million ounces (5 Moz) and the potential is much larger than that.

I’m extremely bullish on Barkerville Gold Mines. I have visited the property several times and believe Barkerville could become one of the world’s biggest gold deposits at a really good grade of something like 3 grams/ton from surface.

TGR: Is Barkerville drilling now?

IG: First, the company is following Snowden’s recommendation to use metallic screening to redo assays because the deposit is nuggety. As a result, we expect a possible 20% bump in the resource.

Second, a lot of the drill holes done through visual inspection were determined to be barren, and were not submitted for assay. Now, Barkerville is assaying those drill holes. That could produce another bump in the resource. In addition, a lot of the Inferred will probably be moved into Indicated and some of the Indicated could even be moved into Measured.

TGR: What’s on tap for some of the junior miners you mentioned in your last interview with The Gold Report?

IG: I really like Terraco Gold Corp. (TEN:TSX.V). It has an excellent management team—a particularly important component for a junior miner. The company has 1 Moz in Idaho, and a property that abuts the Barrick Gold Corp. (ABX:TSX; ABX:NYSE) and Midway Gold Corp. (MDW:TSX.V; MDW:NYSE.MKT) joint venture at Spring Valley. Terraco’s management acquired some royalties on that Barrick/Midway property, which I think could have a value of $50M and that is considerably greater than Terraco’s tiny market cap.

TGR: Terraco has the right to exercise an option on a 3% net smelter royalty on the Barrick/Midway Spring Valley joint venture. Terraco has to act on that $15.1M option before December 2016. Do you think that’s likely?

IG: Barrick will be very interested in appropriating that royalty for itself. Royalties are so costly to production that no company likes to give out big royalties. I think that before the time is up someone will buy out that royalty. That would give Terraco lots of cash.

TGR: What about other companies you discussed?

IG: Temex Resources Corp. (TME:TSX.V; TQ1:FSE) has close to 5 Moz and an NI 43-101 on its Juby and Whitney properties. Whitney abuts Timmins and is situated on the old Hallnor mine, one of the highest-value producing gold mines on that belt.

TGR: Temex has been working on those assets for a long time and finally has something fairly substantial. Once the market turns, could this be one of the better assets out there?

IG: Yes. Temex is trading at $0.09/share and has 5 Moz gold. When the gold price starts bubbling and attention turns back to the junior gold mining companies, it’s not a stretch to see a stock like this doubling and tripling from that position in very short order.

TGR: Does Temex have what it needs to survive until the market turns?

IG: The company really slowed down its cash spending on exploration. It has about $3M in cash and could easily go another year on that amount.

I don’t think cash will be an issue for Temex or Terraco.

TGR: Are there any other companies you would like to talk about?

IG: Two that spring to mind have only recently come to my attention. Brazil Resources Inc. (BRI:TSX.V; BRIZF:OTCQX) has a resource in Brazil. The company has a very competent management team led by Amir Adnani, who ran Uranium Energy Corp. (UEC:NYSE.MKT) and did extremely well for shareholders.

One of the company’s projects in Brazil has about 1.4 Moz gold. It just raised $6.4M, a sign that investors are attracted to the company. According to Amir, the company will use some of that money to buy up cheap assets and add to its portfolio. I like that kind of thinking.

Integra Gold Corp. (ICG:TSX.V) has a similar perspective. It owns the Lamaque project in Québec’s Val-d’Or. That project is an NI 43-101 resource just under 1 Moz, but the company has recently raised $5M. President Steve de Jong sees this downside in gold as an opportunity to acquire cheap good assets and build on the Lamaque project.

TGR: Can you offer a couple of investable themes as 2014 begins?

IG: I’m extremely bullish on the gold price. The gold price will explode to the upside once it becomes apparent that the emperor has no clothes and no gold, and the war on the gold price ends. That means junior mining companies with good assets and good management will do likewise.

On the other hand I’m extremely bearish on the stock market simply because of my cycle work. Since 2000, we’ve been in a 2, 5, 2, 5 sequence: two years down, five years up, two years down and five years up. These are Fibonacci numbers and in cycles such numbers are very important. It suggests to me that the end is nigh for the stock market in 2014.

When that happens, the Federal Reserve will be out of ammunition to keep stock prices higher. Interest rates in the U.S. are essentially at zero and we’re pushing money at the rate of $75B a month into the major U.S. banks. When the market caves in, the Fed will be unable to bring it back because it has no room to cut interest rates. If the Fed keeps printing money at the current rate or increases it, the dollar will be under tremendous pressure. The Fed is caught between a rock and a hard place.

TGR: So, even if quantitative easing (QE) comes back, it won’t suffice.

IG: Increasing QE to induce money back into the stock market through the banks will destroy the dollar. Once that begins, interest rates have to rise and that will be the quandary facing the Fed.

TGR: Ian, thank you for your time and your insights as we head into 2014.

A globally renowned economic forecaster, author and speaker, Ian Gordon is founder and chairman of the Longwave Group, which comprises two companies—Longwave Analytics and Longwave Strategies. The former specializes in Gordon’s ongoing study and analysis of the Longwave Principle originally expounded by Nikolai Kondratiev. With Longwave Strategies, Gordon assists select precious metal companies in financings. Educated in England, Gordon graduated from the Royal Military Academy, Sandhurst. After a few years serving as a platoon commander in a Scottish regiment, he moved to Canada in 1967 and entered the University of Manitoba’s History Department. Taking that step has had a profound impact because, during this period, he began to study the historical trends that ultimately provided the foundation for his Long Wave theory. Gordon has been publishing his Long Wave Analyst website since 1998. Eric Sprott, chairman, CEO and portfolio manager at Sprott Asset Management, describes Gordon as “a rare breed in the investment-adviser arena.” He notes that Gordon’s forecasts “have taken on a life force of their own and if you care to listen, Gordon will tell you how it will all end.”

Read what other experts are saying about:

• Integra Gold Corp.

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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: Terraco Gold Corp., Brazil Resources Inc. and Integra Gold Corp. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Ian Gordon: I or my family own shares of the following companies mentioned in this interview: Barkerville Gold Mines Ltd., Terraco Gold Corp. and Temex Resources Corp. 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: Barkerville Gold Mines Ltd., Terraco Gold Corp. and Temex Resources Corp. 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.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.
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Article by Investazor.com

The quarterly earnings report season is back and promises a hell of surprising moves in the markets. These days the banking sector was in the center of the attention with Bank of America, Goldman Sachs, Morgan Stanley and Citigroup reporting on duty. The first three did pretty well and managed to beat Wall Street’s expectations while the latter was last week’s biggest disappointment in the sector, missing top- and bottom-line expectations.

Today we have in full focus one of the tech giants, International Business Machines, which have been rallying in recent weeks, mirroring the broader market advance. One of the hottest recent news about IBM is its announcement of a $1.2 billion effort to significantly grow its cloud footprint from 40 data centers worldwide in 15 countries and five continents globally, meaning that IBM reasserts its iconic technological leadership one more time in an ever increasing competitive marketplace.

The consensus EPS forecast for the quarter is $6.01 and I think that any EPS which is even slightly better than the consensus can be a catalyst for hitting the $200 mark, technical analysis being the reasoning behind this hypothesis. On a daily chart, the price has made a Double Bottom, broke the resistance line from $186, retested it and now is heading towards the first target at $195, the whole price target of the reversal pattern being the $200 level. So, if the price closes Tuesday above the $195 level on a daily time frame, there are very high chances that by Wednesday, the $200 mark to be hit.

The post Can IBM gain 5% in two days? appeared first on investazor.com.

The ADX indicator analyzes the strengths of the trend; the MACD/OsMA analyzes how likely the trend is. ADX means the Average Directional Index and was developed in 1978 as an indicator of trend strength in a series of a financial instrument.

How to Use ADX Indicator

The ADX indicator is used to quantify the strength of a trend. It calculates using a moving average of price range expansion over a certain period of time. By default an ADX indocator is set at 14 bars, but that can usually be adjusted in the trading platform of choice. The ADX indicator can be used with any type of trades: stocks, shares, funds, indices, forex, commodities, etc.

In the figure below you can see a screenshot of my free demo account with Plus500. In the lowest chart you can see three lines: a green, blue and red one. The dark blue line is the ADX indicator line.

Interpreting the ADX works as follows. A rising ADX means that the market’s  trend will rise and you can do best by apply a trend following system. A downward trend indicates a flat ADX.

An increase of the ADX through the 20 boundary, indicates that there is a new trend is going to take place. Above 20 or 25 is often confirmed by the trend. Wanner, the ADX above 40 opens and then goes down here again, this means that the trend is weakening and a fall can take place again.

NOTE: the ADX indicator going up does not mean the rate is rising, it meas that the rate shows a trend!! 

The ADX indicator is is derived from the DMI indicator, Directional Movement Indicator, which is also developed by the same person responsible for the ADX indicator. The DMI, with help from for example ADX, tells whether the instrument is trending or not.

In the screenshot you can see two DMI lines. The green line is the +DMI and the red is the -DMI. When the -DMI is above the +DMI, prices are moving down and when the +DMI is on top of the -DMI the uptrend has shown.

Technical Indicator ADX

The ADX indicator has certain a value in the range of a minimum of zero to a maximum of 100, indicating ist weakness or strength. This is an overview of the ADX values and trend strength:

In summary: when the ADX value is between 0 and 25 there is no trend at all. When the range is below 25 for at least 30 bars the price enters a range conditions and price patters which are often easier to identify. From low ADX indicator conditions, the price will eventually break out into a trend.

NOTE: a falling ADX trend line means that the trend is strenght is weakening.

How to Trade the ADX indicator: Conclusion

The most important signal on a chart is the price. First you should read the price, second the ADX indicator to determine what the price is doing. Using an indicator like ADX is only handy when it adds something that the price itself doesn;t tell us. The best trend rise out of periods of price range consolidation. A disagreement between the buyers and sellers price are the reason for a breakout. Price momentum differences are created whether there is more supply than demand or more demand than supply.

About the author:

Jan de Wit is your forex and binary options blogger, bringing the best free tips, tools, ebook and more to his subscribers at his site.

By CentralBankNews.info
    Jordan’s central bank cut its benchmark rediscount rate by 25 basis points to 4.25 percent as “a catalyst to further economic growth stimulation through promoting private sector expansion.”
    The Central Bank of Jordan (CBJ), which cut rates by 50 basis points in 2013 after raising them by the same amount in 2012, also said the cut took place amid a continuous improvement in the country’s fundamental economic indicators, such as subdued inflationary pressures, higher appetite for dinar denominated assets, increase investment inflows and the resulting positive impact on foreign reserves.
    The CBJ announced the rate cut on Sunday with the new rates effective from today. The CBJ’s overnight repurchase agreement rate will be 4.0 percent, the weekly repurchase agreement rate 3.50 percent and the overnight deposit window facility at 3.25 percent.
   Jordan’s inflation rate fell to 3.4 percent in November from 5.8 percent the previous month while Jordan’s Gross Domestic Product expanded by an annual 2.80 percent in the third quarter.
   Jordan’s economy is under pressure from the cost of accommodating hundreds of thousands of Syrian refugees and in October the central bank said the drain on resources and higher state spending from the presence of over 600,000 refugees was cutting growth by at least 2 percentage points.

    http://ift.tt/1iP0FNb

OIL 4h

Crude oil has turned slightly to the upside in the past week as expected after a completed five wave fall at 91.00 area. We have been looking for a three wave retracement back to former wave iv) placed at 94.26 which is already the case so we need to be aware of a new bearish reversal in the next few trading days. However, there is room for rally to 96.20 area, but sooner or later we think that downtrend will resume. We will keep an eye on 91.44 level; a decline towards this zone will confirm a completed rally and new leg down.

OIL 4h Elliott Wave Analysis

OIL 1h

Crude oil reached our projected zone around 95.00 area that we highlighted at the end of the past week. We have now five waves up from 91.43 that can be considered as wave c) of a contratrend structure. However, a decline from top must be impulsive and strong to call end of a rally. Would love to see move back to 92.40 that will then open door for new low.

OIL 1h Elliott Wave Analysis

Written by www.ew-forecast.com

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By Dennis Miller – Having No Exposure to Energy Risk is Risky

Because Marin Katusa is the foremost expert on all things energy, I’ve been eager to pick his brain for our subscribers. Marin, an accomplished investment analyst, is the senior editor of Casey Energy Dividends, Casey Energy Confidential, and the Casey Energy Report. He is also a regular commentator on BNN and other major media outlets.

Dennis Miller: Marin, welcome. Thank you for taking the time to share your knowledge with our subscribers.

Marin Katusa: Thanks for having me. It’s my pleasure.

Dennis: I know you are aware that our subscribers are mostly baby boomers and investors on either side of the cusp of retirement. We focus a lot on diversifying among sectors and minimizing risk within each sector. Can you explain where energy opportunities should fit in to our subscribers’ portfolios, including both low- and higher-risk investments?

Marin: It’s a Catch-22 for the mature investor today. Everyone is chasing yield, thereby propping up the prices of yield plays. Dominant companies in the energy sector pay a good dividend and have appreciated very nicely.

Now, I can’t emphasize enough how important it is to lock in gains by putting in Casey profit stops. 25-40% gains on big energy companies are equivalent to double and triple gains in the junior market. Don’t be scared to sell.

For your subscribers, only invest in juniors – which are high-risk investments – with money you can afford to lose. That means no more than 10% of your portfolio. Now personally, I don’t follow that advice, but I’m nowhere near the age of your audience. The younger you are, the more time you have to build your non-risk portfolio. While the juniors can make you tremendous wealth, they are also the riskiest investments in the world.

Every investor should also think about the percentage of his portfolio exposed to the energy sector. It’s mind-blowing to me that investors in your age bracket often have 10% of their portfolio in gold stocks, but very little to none in the energy sector. Globally, the energy sector dwarfs the gold sector, and I believe 10% of everyone’s portfolio – including your readers’ – should have exposure to energy investments. For your audience, 90% of that 10% should be invested in less risky energy companies, and 10% should be in riskier junior energy stocks. Nothing is more pleasing to a portfolio than investing in a company at under US $0.25, and having the stock run to over US $7 (an over 2,500% gain).

Dennis: When I talk about speculative picks, I like to use an analogy. When it comes to pharmaceutical stocks, they usually have a lot of intellectual capital. When their research moves along the FDA approval process, a larger company will often buy them out and bring their product to market. In effect, speculative companies are like a research and development arm for the industry. The same is true in junior mining. Once they discover and have provable reserves, a larger company generally buys them out and mines those reserves.

I know big oil companies do most of their own exploration, but a uranium company might not have the ability or capital to build a mine. Can you explain the nuances of the energy sector in this regard and the investment implications for us?

Marin: Let’s start with oil.  My publication was the first to publish on the potential of the East African Rift and Africa Oil (V.AOI). It was on no one’s radar, and no majors were in the area at the time we first started writing and recommending stocks in the area. Essentially, the oil and gas play for juniors is to get in early and prove up a new concept, locking up a PSC and getting the license to actually do some exploration work. Africa Oil is a perfect example of that, and AOI was able to attract a much bigger company to fund the risk. That stock had over a 1,000% gain.

There’s a similar game plan with shale gas: get in early, and stake up large blocks of land based on a geological concept that the majors are not looking at. Cuadrilla is a perfect case study in that game plan. It staked up some land for very little, proved a concept, and delivered exceptional returns for its shareholders.

In the energy sector, majors are attracted to juniors that have large sections of land with large, previously unrealized potential. The early days of the Eagle Ford oil shales are a good example of this. Smart companies were buying up land for $100 per acre, and in a few years the same land was going for $25,000 per acre.

Profiting from Energy Now

Dennis: I know you have had some phenomenal success in smaller energy picks in the past. At the Casey conferences, many subscribers have told me you made them a lot of money. Do you see any good opportunities on the horizon? If an investor wanted to take advantage of these opportunities, are they better off with an individual company or with an ETF or mutual fund in that sector?

Marin: I’ve never been a fan of ETFs. Also, I don’t like public mutual funds because few ever beat the indices, and investors pay ridiculous fees.

I think there are some excellent energy investments to be made today. But first, a potential investor has to ask himself: “What is my risk tolerance, and what is my time frame?” Africa Oil, Cuadrilla, and Uranium Energy Corp. were all major successes, but they were all very high risk, and it took over 18 months for each success to be realized.

If you do your homework, investing in an individual company will deliver superior gains than an ETF or mutual fund.

Dennis: I know you spend a tremendous amount of time in the field evaluating opportunities. Do you use a process for evaluation similar to Doug Casey’s Eight Ps?

Marin: The most important P to me is “People.” Actually, average people will screw up the best company, and if you invest in the right people, they can turn around the worst company.

The Projects and Politics are also on the top of my list. All the 8Ps are important, but those are the top three in my book.

American Nuclear Power Dependence

Dennis: I recently watched a webinar you did with some real experts on nuclear power and uranium. You cited some surprising statistics I had never heard before, about the number of homes in the US that rely on nuclear power and the number that rely on uranium from Russia. Can you share some of that information for our readers, as well as the investment and security implications?

Marin: Here is another startling fact that, if you are an American, I’m sure you will have a major issue with. In 2012, more uranium was produced by a Russian company on American soil than by all American producers combined on American soil. I’m sure Russians like that fact, but not so much Americans.

Also, the US imports over 90% of the uranium it consumes annually. It is by far the most contrarian investment in energy today globally.

The only solution for the security issues is to pay a higher price for uranium… or 20% of the homes in the US could go without electricity. Talk about creating a chaotic event. The sector and commodity are cheap, and producers cannot make money at current prices.

Dennis: Once a utility has gone through the long, expensive process of building a uranium facility, it is pretty much committed to that one type of fuel. It doesn’t seem to have the latitude to convert, like a lot of utilities did from coal-fired plants to gas. Is that correct?

Marin: There is a misconception that thorium can be substituted for uranium in the reactors. Nothing can substitute for uranium in the existing reactors. In fact, even if the price of uranium doubled or tripled, the increased costs to creating nuclear electricity would be negligible. Once the plant is built, the big costs are paid for.

I think your real concern is this. If the price of uranium rises – as I believe it will – the US utilities will pay whatever it takes to buy their fuel, and that cost will be passed on to the American consumer. There is no realistic Plan B.

Dennis: Is uranium where you see the next best opportunity for huge investment gains? And if so, what caution would you offer to those subscribers who may be close to retirement and do not have the benefit of a do-over with their investment dollars?

Marin: Every investor needs to know his time frame for investing. If an investor is looking to earn yield from uranium, then he should invest in the larger producers. The way to invest in uranium with the lowest risk is to actually buy uranium. There’s no political, production, exploration, or management risk involved. However, you can’t exactly buy uranium and store it beside your gold and silver coins.

We recently put together a special report in which we discuss exactly how investors can get exposure to the lowest-risk uranium investment in the world, which actually owns uranium (U₃O₈) and also uranium hexafluoride (UF₆).

If you’re looking for higher-risk exposure, we’ve had some great success with Fission, which we recently sold for over 100% gains, but it doesn’t pay out a dividend, and produces no uranium. The company explores for uranium.

The Future of Oil

Dennis: We see the price of oil fluctuate regularly. In the long run, how much effect does that really have on the price of energy? You make a great case for uranium; since demand is going to far outpace supply, prices should rapidly escalate.

Marin: The reality is, most oil reserves are in countries that are not friendly to the US, and that oil is produced and managed by national oil companies.

Take Venezuela for example, which has some amazing oil deposits. The US imports almost as much oil from Venezuela as it does from the Canadian oil sands, and yet it pays almost twice as much for Venezuela’s oil as it does Canada’s oil.

Now, is Venezuela reinvesting the profits back into exploration and replacing produced oil? No. Venezuela is actually decreasing oil production, and yet domestic demand is increasing. This is what we call “the big pinch.” Thus, the only solution for Venezuela is to sell less oil, but for a much higher price.

Venezuela is not alone in this problem. Most of OPEC has this problem. Oil will go higher in the years to come. Porter Stansberry bet me 100 ounces of silver on my oil price prediction, and he lost. I offered him double or nothing, and he refused. And it’s not just oil; all energy fuels are going higher.

Dennis: One final question. Energy stocks have been somewhat out of favor over the last few years. What do you anticipate for the next couple of years?

Marin: That is a good thing. You buy when things are unpopular and sell when they become popular again.

The world will need more oil, uranium, and natural gas to keep the global economy going. Higher prices for uranium will result in increased attention by the hedge funds chasing gains. And because the sector is so small, those who are positioned early will make incredible gains only if they sell when it becomes popular – which we will definitely do when it’s time.

Companies bringing North American technologies to old, proven, producing deposits to enhance production will also see considerable gains. For example, there are areas of Europe that produced oil before the first oil well was ever drilled in Texas. Those areas have never seen modern, North American technology, and the projects are de-risked because we already know the oil is there. These areas have produced in the past, and the infrastructure is in place, which means lower costs for implementing enhanced oil recoveries.

Not to mention, Europe depends on Russia for so much of its energy needs, and it pays a premium for that dependence. I think in the coming years, the European energy renaissance will be an area from which to profit.

Dennis: Marin, it looks like we are on the verge of some major changes here in the US. Not only will nuclear energy prices climb, but our electricity bills will also. I really appreciate you taking the time to teach our subscribers about the energy sector. If we have to pay higher electric bills, we need to profit too. Thanks for taking the time to help us.

Marin: My pleasure, Dennis; thanks for having me.

As the editor of Miller’s Money Forever, I often have the pleasure of interviewing my colleagues on a variety of topics to give our subscribers even greater exposure to different investing sectors. Recent interviews include:

• Maximizing Your IRA with Terry Coxon, senior economist and editor at Casey Research;
• The Ultimate Layer of Financial Protection with Nick Giambruno, editor of International Man;
• Juniors for Seniors with Louis James, globe-trotting senior editor of Casey Research’s metals and mining publications; and
• Other esteemed colleagues.

Gain access to everything our portfolio has to offer, as well as access to these top minds through occasional interviews and input, with your risk-free 90-day trial subscription to Miller’s Money Forever.