Month: April 2014

By MoneyMorning.com.au

I begin with a strange excerpt from the Financial Times:

‘Nigeria made a play for recognition as Africa’s biggest economy by changing the way it calculates its gross domestic product. Thanks to the change, the country’s GDP almost doubled, to $509 billion.’

Turns out such changes are not uncommon.

Back in 2010, between Nov. 5–6, Ghana’s GDP jumped 60% overnight. It went from a ‘poor’ country to ‘low-middle income’ with the change of a single figure.

And one night in 1987, Italy’s economy grew 20%. It passed the U.K. and became the fifth-largest economy in the world. ‘A wave of euphoria swept over Italians,’ The New York Times reported at the time.

I could go on…

Today, we take another look at that abstraction called GDP, or gross domestic product — to which far too many investors pay far too much attention. That little figure has quite a history and many problems. To admit a bias, I despise the little bastard.

Diane Coyle is one who does not. Her book GDP: A Brief but Affectionate History inspires this letter. Coyle’s fascinating 140-page book was one of the freebies at Grant’s Spring Investment Conference in New York, and I read it on the train ride home.

Essentially, GDP aims to be a summary of the output in an economy in any year. It gives, proponents say, a measure of size and growth.

It had an ignoble birth.

‘GDP is one of the many inventions of World War II,’ Coyle writes. I should’ve known. War, of the quartet of infamous horsemen, motivated the first attempts to systematically measure this thing called an economy.

The first stirrings came earlier, in 1665. War was the impetus then too. William Petty tried to assess England and Wales’ ability to fight and finance the Second Anglo-Dutch War. Petty wanted to show that the country could suffer more taxes to take on Holland and France. Another early attempt by an Englishman has a title that makes its aim clear: An Essay Upon the Ways and Means of Supplying the War.

In the US, it was the Great Depression that spurred efforts to get a clearer picture of the economy. The goal was to aid the government in figuring out a way to end the slump. Simon Kuznets won a Nobel Prize for his work during this time. Coyle writes:

‘His first report, submitted to Congress in January 1934, showed that America’s national income had been halved between 1929–32. Even in those depressed times, the report was a best-seller, at 20 cents a copy, and the first print run of 4,500 copies quickly sold out.’

President Roosevelt cited the figures when he launched his recovery program. GDP, then, has been the handmaiden to both war and government expansion. I would argue that has not changed to this day.

What has changed is the math behind the number itself. There was a time, for example, when defence spending was actually subtracted from GNP (which was GDP’s predecessor). But that didn’t work because…well, check out this bit, which Coyle quotes from an official history:

‘The assessment was overly grim because national income fell short of the total market value of goods and services produced, of which defense spending was a component… By including all government purchases as part of national products, the GNP statistics established the role of national government in the economy as that of an ultimate consumer…’

So they didn’t like the story the number told and changed it. This is one of many moves over time. The inclusion of military spending as a positive was also an important shift in thinking. As Coyle writes, ‘For two centuries, ‘the economy’ was the private sector.’ No longer. Now the more the government spends, the more the economy grows, according to GDP.

This sort of gets us to the question of what to count and how to count it. Problems abound.

For example, if you buy a service, it’s counted. If you do it yourself, it isn’t. This reminds me of the example Bill Bonner, our co-founder, likes to use. If you mow your lawn and your neighbour mows his lawn, there is no addition to GDP. But if you pay your neighbour $30 to mow your lawn and he pays you $30 to mow his, then GDP goes up $60.

There are many things like this, including some weird stuff (like hedonic pricing) that just sounds like a bunch of nonsense to me. And GDP deals badly with things like quality and innovation.

Then there are currency adjustments that foul things up mightily. In 2007, the World Bank lopped off 40% from China’s GDP because of currency adjustments. That wasn’t even the biggest change. Ghana lost 52% of its GDP that year. Yet I’m sure the working man in Ghana woke up that morning and found his life hadn’t changed a bit…

But the real story of GDP, to me, is how political it has become.

This gets us back to those big jumps in GDP that I started with. In fact, Coyle opens her book with the story of Andreas Georgiou, head of Elstat (Greece’s official statistical agency) facing criminal charges and a parliamentary inquiry. She writes:

‘His crime? Trying to produce accurate statistics on the Greek economy after decades during which official statisticians had massaged figures at the behest of politicians.’

Greece needed loans. Getting them depended on meeting ‘tough targets for reducing how much the government was spending and borrowing’. So they made up the numbers to get the loans.

I’m reminded of what Herodotus once wrote of the Persians: ‘To tell a lie is considered by them the greatest disgrace, and next to that to be in debt…especially because they think that one in debt must of necessity tell lies.’

So now you understand the game afoot.

Now you know why countries fiddle around with their GDP. They have…motives. They want loans, as in the case of Greece. Or they want aid, as in the case of certain African countries. Richer countries play the game too. All governments use GDP to show a certain picture to their electorate or to potential investors.

Nonetheless, Coyle comes to a charitable conclusion at the end of the book. She writes that ‘we should not be in a rush to ditch GDP,’ and says it has its points. ‘GDP does a good job of measuring how fast (or not) the output of ‘the economy’ is growing,’ she writes, ‘and GDP growth is closely linked to social welfare.’

She acknowledges the challenges and shortcomings, but still has warm words for her troublesome protagonist. ‘At present, we are in a statistical fog,’ she concludes, ‘[but] GDP, for all its flaws, is still a bright light shining through the mist.’

I beg to differ.

GDP is an abstraction too far removed from reality. Yet people make real-world policy on this fantasy as well as a witch’s brew of sister concoctions. We look to boost GDP or lower the unemployment rate or manage inflation through the CPI.

This reminds me of what Paul Goodman once wrote about how the machine starts to run for its own sake. These things replace the reality they tried to represent. So GDP goes up even though the quality of life has gone nowhere; the unemployment rate falls, but tens of millions can’t find work and stop looking; and inflation is low even as people find their expenses going up.

I say let’s ditch GDP. It’s not a bright light in the fog. It is the fog.

Chris Mayer,
Contributing Editor, Money Morning

Ed Note: The above article was originally published in The Daily Reckoning US.

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By MoneyMorning.com.au

By CentralBankNews.info
    Sri Lanka’s central bank maintained its monetary policy stance, as expected, and said the country’s economy was poised for a stronger performance on the back of a recovery in the external sector, sustained momentum in construction and manufacturing, and low and stable inflation.
    The Central Bank of Sri Lanka kept its Standing Deposit Facility Rate (SDFR) at 6.50 percent and the Standing Lending Facility Rate (SLFR) at 8.0 percent. The central bank rejigged its policy framework in January with the SDRF rate replacing the previous benchmark repo rate.
    Sri Lanka’s headline inflation rate was steady at 4.2 percent in March and February and the central bank expects inflation to remain in mid-single digits throughout the year although there might be some price pressures from supply disruptions linked to drought.
    The central bank targets inflation of 4-6 percent this year and 3-5 percent in 2015 and 2016. In 2013 the central bank cut the benchmark rate by 100 basis points to boost economic growth, which rose to 7.3 percent in 2013 from 6.3 percent in 2012.

    But the central bank said credit to the private sector only grew by a modest 4.4 percent in February from the same month last year, down from 5.2 percent in January. Credit obtained by public corporations declined further in February and continued fiscal consolidation, together with the proceeds of a sovereign bond issue in April is expected to ease the public sectors reliance on bank financing in coming months.
    “The resulting release of funds for private investments bolstered by sufficient market liquidity levels would provide the necessary stimulus to strengthen private sector activity and in turn, as expected, expand credit growth from the second quarter onwards,” the bank said.
   Sri Lanka’s Gross Domestic Product expanded by an annual 8.2 percent in the fourth quarter of 2013, and the central bank has forecast 7.8 percent growth for 2014.
    Inflows of workers’ remittances rose significantly in February and earnings from tourism also rose in the first quarter, the bank said, adding that gross official reserves were estimated at around US$ 8.0 billion at the end of February, the equivalent of 5.3 months of imports. Reserves are expected to rise further with the proceeds of this month’s $500 million sovereign bond.

    http://ift.tt/1iP0FNb

Source: JT Long of The Gold Report (4/21/14)

http://www.theaureport.com/pub/na/willem-middelkoop-and-terence-van-der-hout-turnaround-stories-revolve-around-proven-management

Willem Middelkoop and Terence van der Hout of the Netherlands-based Commodity Discovery Fund believe that when the world’s reserve currency is reset away from the U.S. dollar in the next decade, gold prices will rise and mining equities will follow. Van der Hout and Middelkoop tell The Gold Report that by focusing on producers, near-producers and turnaround stories, they plan to capitalize on the opportunities in North America, Africa and beyond.

The Gold Report: Willem, your first book predicted the collapse of the global financial system a year before the 2008 fall of Lehman Bros. In your new book “The Big Reset: War on Gold and the Financial Endgame,” you’re predicting the demise of the dollar as the reserve currency by 2020. You said it can occur as a carefully planned event or as the result of a crisis. What would these two scenarios look like?

Willem Middelkoop: Authorities always prefer to act within a well-planned scenario. The U.S. and the International Monetary Fund (IMF) understand that the U.S. dollar has to be replaced one day. It could be 2020. It could be 2018. It could be 2023. It has to be replaced by another anchor to support the worldwide monetary system.

Both the U.S. and the IMF will try to stay in the driver’s seat as they propose the transformation of the worldwide financial system. They could introduce special drawing rights (SDRs), an international reserve asset created by the IMF in 1969 to supplement its member countries’ official reserves. Its value is based on a basket of four key international currencies, and SDRs can be exchanged for freely usable currencies. The U.S. and the IMF could propose that the SDRs be used to replace the dollar as the anchor for the worldwide financial system.

However, the IMF and its partners, the central banks around the world, will need at least five more years to prepare the system for such a change. A crisis of confidence around the dollar could occur before the IMF and its partners are ready for a reset operation. If a crisis of confidence occurs, the IMF would have to mount a rescue operation to save worldwide trade, as we saw in early 2009. We had some similar, but smaller, resets following the crisis in Germany after the Weimar hyperinflation in 1923 and, more recently, in Cyprus.

The SDRs could act like a monetary umbrella and consist of dollars, euros, British pounds and Chinese yuan after a monetary reset.

TGR: A lot of this plan is going on backstage. Most people don’t know about it. What signs should we look for to signal the shift so we can adjust our portfolios?

WM: This is a very important question. Investors need to understand that such a transformation in our monetary system might be introduced over a weekend. In Cyprus, there were not many warning signs. That’s why I started a new blog called thebigresetblog.com, where I follow the latest information, and I’m publishing the latest signs pointing toward such a reset. On March 17, I published a story that was based on an interview with George Soros. In that interview with The Financial Times, Soros said the system is broken and needs to be reconstituted. I also published an interview with Christine Lagarde, head of the IMF. She used the term “reset” multiple times in interviews during the World Economic Forum.

Another important sign is an editorial by the Chinese state press agency recently saying that the time has come for a new international reserve currency to be created to replace the dominant U.S. dollar.

Both East and West sent out specific signals pointing toward this transformation. Of course, it’s important to watch the gold and dollar charts on a daily basis, because when a reset is close, you can expect major moves.

TGR: What does this mean for gold? The signs are out there—why is the price hovering around $1,300/ounce ($1,300/oz)?

WM: It’s quite easy to understand why central banks would like to revalue gold to devalue the dollar at a certain stage of this reset. The U.S.’s official gold reserves, which are still 8,000 tons, are valued at the historical cost price of $42/oz. A revaluation toward $4,200/oz would grow the value of these gold reserves from the current $11 billion ($11B) to $1.1 trillion. Without such a revaluation, gold prices will have to rise as well given the structural deficits in the gold market. Worldwide gold production can’t keep up with the growing demand for physical gold. Recent figures by the World Gold Council show a deficit of 700 tonnes physical gold.

We have seen lots of manipulation of the gold price, similar to the 1960s when the London Gold Pool was keeping gold prices at $35/oz. Central bankers have done this for a number of years by selling large amounts of gold from the official reserves of Western central banks. We’ve seen another round of manipulation of the gold price in the last few years. This can’t go on for another 5 to 10 years.

TGR: If the gold price went up, would the precious metals mining stocks follow or, because of the manipulation, would there not be a connection?

WM: The gold price started to rise at the end of December. When the gold price went up 10%, precious metal mining stocks went up sometimes as much as 30%. Investors will come to understand that the gold price might trade higher in the following weeks and months, and precious metal mining stocks should also go higher.

Countries like China and Russia are also growing their gold reserves enormously. With estimates for yearly deficits in the physical gold market up to around 1,000 tons/year, more investors see precious metal companies as the only ones that own huge amounts of physical tons still in the ground. When they can be sold at higher prices, these companies will become hugely profitable.

We’ve seen that in the past. In the 1970s, we had the last gold rush and lots of free cash flow was generated by gold and silver producers. In the late 1970s and the early 1980s, these amounts were enormous. Senior producers had gains of 200–300% in the last two years of the gold bull market. The junior producers and the exploration companies showed gains of more than 1,000% on average.

TGR: What markets do you think are good right now? What commodities do you like?

WM: We still have 60% of our equity investments in gold-related equities, 20% in silver-related and the last 20% in base metals and specialty metals. The only change in the last two years has been that we decreased our investment in exploration companies and increased our investment in royalty companies and senior producers.

TGR: Why was that?

WM: Because of the low valuation in the correction since the middle of 2011. The valuation for gold producers became almost laughable. Of course, a producer, which is creating cash flow and is still profitable at these prices, has only upside in the current market. It was a defensive move. The current bidding war concerning Osisko shows it was a smart move to add to our position during the down turn.

Terence van der Hout: Technically, an exploration company that has no assets can just go to zero—there are a number that are doing that—whereas producers will always be worth something, even at fire sales.

That’s another consideration that we’ve been looking at on the downside. Very recently, we’ve been subtly shifting from producers and near-producers to advanced developers. We see a turn in the markets. Those companies are well leveraged to the gold price and have a fairly extreme undervaluation to catch up with. Normally, they will be revalued to something relating to the amount of resource they produce.

One of the companies that we’ve been invested in for a while is OceanaGold Corp. (OGC:TSX; OGC:ASX). It has been producing gold in New Zealand at a steep cost, but it has a gold-copper deposit it brought to production in the Philippines that is performing very well. It’s a classic story of a startup producer that is beginning to be valued at its full potential.

TGR: Do you think it’s beginning to be recognized by the market because of the diversification of the company or because of the new resource and reserve that it came out with?

TvdH: It was a function of OceanaGold’s performance in production rather than the resource update. The added resources were mainly from its newly acquired El Salvador project, which is miles away from production. OceanaGold is finally being rewarded in a market that’s turning.

TGR: What other companies fit that model?

TvdH: Lake Shore Gold Corp. (LSG:TSX) is similar in the sense that it’s showing a turnaround. It was run as an exploration company while it was producing. Lake Shore has a wonderful land package, but it should have been focused fully on production. It made a number of changes about a year ago and became cash-flow positive in the last two quarters.

WM: And profitable even with the current gold price.

TvdH: It’s a good turnaround story.

TGR: Does Lake Shore have any catalysts coming up that will help the market see what a turnaround it has made?

WM: Given the current uptrend for gold prices, companies like Lake Shore Gold, which are already profitable at these low numbers, are becoming very profitable when the gold price regains some of its value toward $1,400/oz. We expect the gold price to move up toward $1,500/oz, and then these kinds of smaller producers that have turned the corner will react strongly in this better pricing environment.

TvdH: The same goes for Detour Gold Corp. (DGC:TSX), which is similar to the Osisko Mining Corp. (OSK:TSX) project that’s now in the throes of being taken over by a major. It has the same style of deposit. It’s open pit, low grade and bulk mineable. It’s been cheap to extract.

Detour was expecting a quicker ramp-up with fewer problems getting to full production. Now it’s focused on getting the right mine sequence. It has also made a few management changes. Detour isn’t cash-flow positive yet, but it’s on the right track.

Much like Osisko, it’s a no-brainer that Detour could be taken over sometime in the future. It will be revalued, particularly at the takeover stage.

WM: Since our start in July 2008, we have had 25 takeover situations in our portfolio. The ongoing bidding war between Goldcorp Inc. (G:TSX; GG:NYSE) and Yamana Gold Inc. (YRI:TSX; AUY:NYSE; YAU:LSE) for the Osisko projects is the 25th.

Detour is the largest Canadian gold mine, and it just started producing. Looking at the market cap, we get all the gold resources thrown in for free. The current market cap is a little shy of the total capital expenses to build the mine. There’s great value still to be seen in the market.

Investors should be taking advantage of the current situation. There’s more deal flow in the market. Almost every week, we see the start of a new mining or private-equity fund focused on mining. There was a new fund started by some JPMorgan bankers. The Carlyle Group just started a new commodity fund. Billions and billions are fleeing into the market. This gives us confidence that the bottom has been set.

TvdH: Another company that stands out for me is Midas Gold Corp. (MAX:TSX), which is developing a gold-antimony project in Idaho. There is currently no antimony production in the U.S. It has been designated as a critical mineral, but it is largely sourced from China, which has put some export restrictions on antimony during the last several years. Furthermore, Midas’ project is large. It will be relatively cheap to build. Because of the antimony kicker, which is about $10/kilogram, we expect the mine will be cheap to operate. Idaho is also a derisked jurisdiction. A couple of mines already operate in Idaho, and the Midas gold project is designated as a brownfield site, which should make the permitting quicker.

TGR: Midas just did a $10 million ($10M) private placement. Do you know how it plans to use those funds to add value?

TvdH: We were lucky to have a small share of that private placement. It is putting at least part of that money into advancing toward the prefeasibility stage and deciding what kind of processing it will employ—bio-oxidation (BiOx) or normal solvent extraction. A prefeasibility study and the subsequent environmental impact statement would come along later this year.

WM: We still have a very big focus on new discoveries. Our research department is very active and is always on the hunt for new discoveries. We love the discoveries by Probe Mines Limited (PRB:TSX.V), Fission Uranium Corp. (FCU:TSX.V) and Reservoir Minerals Inc. (RMC:TSX.V).

TvdH: Probe was looking at classic, low-grade, large, open-pit bulk mining in Canada until it discovered a high-grade zone at depth and along strike. That was the signal for Agnico-Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) to take a 9.9% stake in the company. That started its performance on the stock market as well.

Probe is becoming a bit of a different beast. It has shown that the high-grade area is consistent; it’s now a matter of finding how long it is because it does need a certain volume. It would require an underground operation. Probe is drilling that area; if that shows upwards of 1 million ounces (1 Moz), it might make it to an underground mine as a standalone, apart from the open pit that Probe was looking to develop previously. It becomes a completely different kind of project from then on.

TGR: When might those results be in?

TvdH: Probe has been drilling since February. A few results have come in, but not quite the stepouts that we’d expected. I’m assuming that results will be coming in over the next couple of months.

WM: It is an important discovery for Ontario because it changes the whole geological understanding of this part of Canada. It’s important for investors to study this one.

The discovery by Fission in the Athabasca Basin is too important to ignore, too. We’ve been big investors from the start of Fission. We were investors in Hathor Exploration, which was taken over two years ago. We were investors in the previous Fission company, which made the discovery along with Hathor. It’s one of those world-class discoveries that can create billions in value. It still has a 100% hit rate—and if the deposit keeps growing, I wouldn’t be surprised to see more than 100 million pounds of uranium in this discovery.

TGR: And Fission has had a nice effect on all of the other companies in the Athabasca as well.

WM: Yes, because it convinces us that the only good place to hunt for new uranium discoveries is this Athabasca Basin.

TvdH: Interestingly, next-door neighbor NexGen Energy Ltd. (NXE:TSX.V) has made a discovery on a separate conductor to the one that Fission is drilling on, which implies that any of the conductors—Fission has loads of conductors on the rest of its property—could hold a similar amount of mineralization. That’s what gets the excitement going.

WM: A lot of blue sky still. I expect a bidding war on this Fission discovery within the next 12 to 18 months. It’s too big and it’s too important for the major producers worldwide to ignore. There will be lots of Asian interest for this one as well.

TGR: Is there another discovery near Vancouver?

TvdH: Falco Pacific Resource Group (FPC:TSX.V) is a fascinating story. The company purchased a drill database, which was not digitized, from Noranda Inc. It purchased the property for $5M and 7M in shares. Without one drill hole, it now has a deposit of 2.2 Moz, grading about 3.4 grams per ton (3.4 g/t) underground. On the face of it, you’d say the grade would be a bit dodgy, but Noranda had built the mine almost to the stage of opening it. It put in all the underground workings. It put in the mill. Then it realized it was gold, it wasn’t a base metal, which was the focus of the company at the time. Then it had a merger with Falconbridge Ltd. Falconbridge was taken over by Xstrata plc (XTA:LSE) and this project was completely forgotten until Falco Pacific picked it up not too long ago.

Falco’s project is smack in the middle of the old Noranda gold district. It has a good management team led by Chairman Darin Wagner, who was involved in West Timmins Mining Inc., which sold to Lake Shore Gold. Howard Poulsen, a well-known geologist, is on its technical advisory board. Mike Byron, the vice president of exploration and a director, has more than 25 years in the field. If it can show a few more ounces, then this could be a nice mine at a cutoff of 3 g/t.

TGR: A number of the companies in your fund are in Africa. How do you assess risk for a given region in Africa?

TvdH: There are various types of risks in Africa. There is a cost risk in West Africa because power is expensive and infrastructure is lacking. South Africa has energy issues and social and labor unrest. We have 70% of our portfolio invested in less risky areas, like North America. We used to avoid South Africa entirely, but something has changed in the way that we look at platinum.

Platinum Group Metals Ltd. (PTM:TSX; PLG:NYSE.MKT) is developing a classic platinum mine in South Africa—a thin reef mine, which will be labor intensive. But it has also come up with a new discovery at Waterberg. It’s not a 30-centimeter thick layer of platinum-enriched rock—it’s anywhere between 5–20 meters and wider. It’s amenable to underground bulk mining methods, which makes mechanization possible. That keeps the project largely aloof from the labor unrest issues.

Waterberg also has enormous size potential. The current size of the deposit is already world class. Platinum Group Metals made a stepout of about 5 kilometers (5km) recently, and it hit the same mineralization at a certain depth. Just a few weeks ago, it announced a 16km stepout had hit another mineralized structure. It owns about 23km of strike length. There is still huge blue sky on that project.

We very much like the future for platinum group metals (PGMs) given that the Chinese automobile market is exploding and will need all the PGMs that the world can provide.

The Waterberg project and Ivanhoe Mines Ltd. (IVN:TSX) Platreef project are the future of platinum mining in South Africa.

WM: Platinum and palladium are very interesting for investors right now. The current supply and demand prognosis for palladium and platinum indicates shortages. These shortages will be structural. The palladium market will soon demand 9 Moz/year. The production will only be around 6 Moz—there’s a huge deficit. Platinum and palladium are especially important to Asia, where they are used in the exhaust systems of cars, to combat the smoke and air pollution.

TGR: Interesting. Where else are you focusing in Africa?

TvdH: We’ve been watching Asanko Gold Inc. (AKG:TSX; AKG:NYSE.MKT) in Western Africa for a long time. It used to be called Keegan Resources. It was doing very well on the exploration front and then there was a management and name change. Along came Peter Breese. He has a huge track record. He has developed seven mines, which he sold to Norilsk for $6B. He developed, built and sold off a uranium company for $1B. If this gentleman steps into a project, he’s not there just to pick up a paycheck. He’s there to build mines.

Breese, who is president and CEO of Asanko, brought about the merger with PMI Gold Corp. in February. He now has a huge cash position. He’s fully financed to bring a decent-grade project to production in Ghana by 2016.

TGR: You seem to like these turnaround stories.

WM: A strong, proven, successful mine manager or entrepreneur can build companies time and again. The longer we are in this business—we’re investors for more than 10 years now—the more we try to follow the good management teams.

TvdH: That’s a derisking aspect of the business: management. Management is one of the prime parameters for us.

WM: However, we’re quite fed up with the high salaries being paid to executives running companies that don’t perform. The industry has to understand that investors are taking these compensation packages into consideration when they decide if they should invest or not.

TGR: Do you predict an impact from the conflict in Russia as it is a supplier of PGMs?

WM: Only if more sanctions are applied. Russian President Vladimir Putin understands how vulnerable the U.S. and the U.S. dollar have become. If strong sanctions were applied against Russia, it would be very easy for the Russians to stop selling oil in dollars and start selling it in yuan, rubles or even in gold. The U.S. knows it should be careful not to make Putin too mad because the dollar is too vulnerable. This is why no strong sanctions have been implemented until recently.

TvdH: Last week, Russia-based Norilsk Nickel (GMKN:RTS; NILSY:NASDAQ; MNOD:LSE) made a deal with Chinese and Japanese buyers of palladium, which could tie up large quantities for the next five years. These are interesting deals because in the past Norilsk was just selling palladium at the spot price, whereas now the Chinese and the Japanese are seeing the strategic aspect of palladium and are willing to tie it up for longer periods to ensure their supply chain.

TGR: Any final advice for our readers as we’re going into this shifting world?

WM: I would like to talk a little about silver. We talked a lot about gold, and gold is very important. It’s my opinion that gold will come back in the monetary system. I don’t expect a full gold standard, but gold will become more important. But silver is poor man’s gold. When the gold price goes up too much, more people start to buy silver instead. However, there are no large, above-the-ground stockpiles available anymore. Silver was still used to produce coins until the 1980s. These above-the-ground silver stockpiles are almost completely gone. We’re very interested in great silver companies with lots of ounces in the ground.

TGR: Thank you both for your time.

Willem Middelkoop is a successful entrepreneur and publicist from The Netherlands. He is a former market commentator for Dutch National TV, founder of Amsterdamgold.com, a web shop for gold and silver bullion that was sold in 2011, and founder of the Commodity Discovery Fund, where he is currently the principal. Middelkoop is a member of the Advisory Board of the London-based Official Monetary and Financial Institutions Forum (OMFIF). He is author of several books covering financial markets and the economy. His most recent book, “The Big Reset,” his first book in English, was published at the end of 2013 and will be published in Chinese later this year.

Terence van der Hout is a senior researcher at the Netherlands-based Commodity Discovery Fund. The fund focuses on investing in world-class natural resources discoveries in precious metals, base metals and specialty metals, as well as undervalued start-up producers. Van der Hout also distributes Strategic Metals Bulletin, a free, monthly commentary on developments in the world of critical metals. To subscribe, please send an e-mail to: [email protected]. Van der Hout has a background in finance and holds a master’s degree in administration in political science from the University of Leiden.

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DISCLOSURE:

1) JT Long conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an employee. She owns, or her family owns, shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Probe Mines Limited and Fission Uranium Corp. Goldcorp Inc. is not associated with Streetwise Reports. Streetwise Reports does not accept stock in exchange for its services.

3) Terence van der Hout: I own, or my family owns, 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: None. The Commodity Discovery Fund owns shares in Asanko Gold Inc., Detour Gold Corp., Midas Gold Corp., Fission Uranium Corp., Osisko Mining Corp., OceanaGold Corp., Lake Shore Gold Corp., Goldcorp Inc., Yamana Gold Inc., Probe Mines Limited, Reservoir Minerals Inc., NexGen Energy Ltd., Falco Pacific Resource Group and Platinum Group Mining Ltd. 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) Willem Middelkoop: I own, or my family owns, 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: None. The Commodity Discovery Fund owns shares in Asanko Gold Inc., Detour Gold Corp., Midas Gold Corp., Fission Uranium Corp., Osisko Mining Corp., OceanaGold Corp., Lake Shore Gold Corp., Goldcorp Inc., Yamana Gold Inc., Probe Mines Limited, Reservoir Minerals Inc., NexGen Energy Ltd., Falco Pacific Resource Group and Platinum Group Mining Ltd. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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By HY Markets Forex Blog

Following the Easter break, some of the market resumed as stocks in the Europe posted a higher weekly gain while stocks in the Asian region were mostly mixed, with stocks in China falling.

In China, stocks were seen falling as the benchmark index dropped to its lowest in five weeks, on worries new shares sales could draw funds from existing equities. In Asia, most of the markets across the region are closed for a holiday.

Meanwhile in Russia, stocks were seen climbing the most in over three weeks after the country held talks with representatives from Ukraine, the US and the European Union finalizing an agreement to ease tensions.

In Europe, France’s CAC 40 climbed 1.5% higher, while the German DAX index gained 1% at the time of writing. At the same time the Europe Stoxx 600 Index rose 1.1% to 332.43, while the UK benchmark FTSE 100 advanced 1%.

Market – Asia

The benchmark Nikkei closed flat at 14,512.38, after rising to 14,649.50 on April 8. While Tokyo’s Topix index edged 0.2% lower to 1,171.40, with trading volume 27% lower than average in the last 100 sessions. The new JPX-Nikkei Index 400 fell 0.2% lower to 10,655.42.

The MSCI Asia Pacific Index edged 0.1% lower to 139.03 at the time of writing, while the yen weakened further against the greenback after Japan reported its trade deficit widened more than estimated last month.

China

In China, the Shanghai Composite Index fell 1.5% to 2,065.83, the most since March 10. The gauge slid by 1.5% last week following the release of a data that showed that the country’s economy growth slowed down to it’s weakest in six quarters.

“Investors are still mainly concerned about the resumption of IPOs,” said Zhou Lin, an analyst at Huatai Securities Co. in Nanjing. “There are worries about tighter liquidity from the IPOs and that the pace of approvals will be faster than expected. Stocks are likely to fall for the rest of the month.”

At close of trading the main World Stock Markets were as follows:

FTSE 100                                                      6,625.11

Dow Jones I.A                                          16,408.54

Nasdaq Composite Index                 4,095.52

Nikkei225                                                   14,512.38

Hang Seng                                                  22,760.24

CAC 40                                                          4,431.81

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The post Stock Market Review 21th April appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

Crude prices were seen trading flat on Monday, with the North American West Texas Intermediate (WTI) steady and the European Brent crude falling for a second day as traders’ worry that tension between Ukraine and Russia may escalate.

The West Texas Intermediate for May delivery slid by 21 cents to $104.09 a barrel on the New York Mercantile Exchange. While the European benchmark Brent crude lost 64 cents to $108.89 a barrel on the London-based ICE Futures exchange.

Russia

The US and the European Union continue to warn Russia with further economic sanctions against Russia after the country’s shootouts in the eastern region of Ukraine over the weekend.

According to the Interior Ministry, the deadly shootout that occurred over the weekend in eastern Ukraine left at least three people dead.

However, officials from Russia, Ukraine, the US and the European Union met in Geneva on April 17 to discuss easing tensions between the countries and called for the illegal groups in Ukraine to disarm and return seized buildings to the owners and evacuate the occupied public placed.

Crude – Keystone Pipeline

Meanwhile the President Barack Obama’s administration said it will delay the ruling on the Keystone XL pipeline that brings the Canadian crude south to the US.

On Friday, the State Department said it would delay its decision until questions’ regarding the pipeline’s northern through Nebraska are answered. The pipeline’s southern route of the project began to move crude to the Texas Gulf Coast from Cushing in January.

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The post Crude Prices Trades Flat; Tensions In Ukraine in Focus appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

Article By RoboForex.com

Analysis for April 21^st, 2014

EUR USD, “Euro vs US Dollar”

After rebounding from local level of 61.8% (1.3860), Eurodollar started falling down. Earlier pair rebounded from the group of upper fibo levels (1.3900). Most likely, bears may break minimum in the nearest future.

As we can see at H1 chart, Eurodollar started new correction. I still got three sell orders with target near the group of lower fibo levels (1.3760). I’m planning to increase my short position as soon as market breaks level of 50% (1.3818) downwards again.

USD CHF, “US Dollar vs Swiss Franc”

After rebounding from level of 50% (0.8785), Franc started new ascending movement. Earlier price rebounded from the group of fibo levels at 0.8745. Last Friday, I opened another buy order, the third one.

As we can see at H1 chart, local correction reached level of 23.6% from previous fast ascending movement. Possibly, during the day bears may test level of 38.2%. In general, Franc is expected to start growing up towards the group of upper fibo levels (0.8845 – 0.8850).

RoboForex Analytical Department

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Article By RoboForex.com

Analysis for April 21^st, 2014

DJIA Index

Probably, Index completed double three pattern inside wave [2]. On minor wave level, price is finishing the first ascending wave. After completing wave (2), instrument is expected to start growing up inside the third wave.

More detailed wave structure is shown on H1 chart. Price is finishing the fifth wave inside wave (1). Earlier, at the end of wave 4, I opened another buy order and have already moved stop into the black. In the near term, price is expected to start the second wave, which may take the form of zigzag pattern.

Crude Oil

Probably, Oil finished wave 2. Earlier, price formed bearish impulse inside wave 1. I’ve got only one sell order so far, but as soon as market start falling down I’m planning to increase my short position.

As we can see at the H1 chart, after completing zigzag pattern inside wave [Y], Oil formed initial bearish impulse inside wave (1). Possibly, in the beginning of this week price may break local minimum while forming the third wave. After that, I’ll move stop into the black.

RoboForex Analytical Department

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

GBPUSD remains in uptrend from 1.6465, the price action from 1.6820 could be treated as consolidation of the uptrend. Another fall to 1.6700 area to complete the consolidation is possible. Key support is at 1.6660, as long as this level holds, we’d expect the uptrend to resume, and a break of 1.6841 resistance could trigger another rise to 1.7000 area. One the downside, a breakdown below 1.6660 support will indicate that the uptrend from 1.6465 had completed at 1.6841 already, then the following downward movement could bring price back to 1.6500 zone.

Provided by ForexCycle.com

By MoneyMorning.com.au

Sex, drugs and rock ‘n roll.

That powerful force behind social deconstruction and cultural transformation in the West reminds us of the good old days.

But in 2014, the year of the horse, something similar is happening in China. But we call it ‘sex, money and social media’.

By the way, my name is Ken Wangdong. Kris Sayce has hired me to begin work on an exciting new project — finding the best investment opportunities in the second largest economy in the world, China.

You’ll learn more about me and the project I’m working on in the coming weeks. But here’s the 10-second version: I was born in Beijing, but moved to Sydney at the age of 11. Frequently flying between the two cities, I have studied, worked and invested in both countries over a span of 17 years.

It has given me an important vantage point. This is what I’ve learned…

If you are to invest successfully in the Chinese dragon, you must understand the dragon.

China is complex and deeply multi-dimensional, in its culture, history, social values, economy, philosophy, and politics. To invest successfully in China, you need to have intimate knowledge and experience of all its dimensions and understand how they make up the whole.

That’s where I come in.

Sex

Take a look at this recent headline from CNBC: China’s prostitution crackdown hits cognac.

Apparently, China president Xi Jinping’s anti-corruption and anti-prostitution probe rages on. As a result, the luxury retail sector and high-end alcoholic beverage sales are being hit hard.

But that doesn’t mean you should rush out to sell your luxury brand and high-end spirit stock holdings just yet (in fact I believe this is an undervalued sector). Because this is probably the hundredth time the government has cracked down, and like every time before it will pass.

How do I know? Well, we have to dig a little into Chinese history.

Prostitution was an honored profession run by public offices in the ChunQiu Period (770BC–476BC). The arguably strongest period in Chinese history was the Tang Dynasty (618AD–907AD), during this time, the prostitution industry was privatized and it flourished.

Prostitution first became regulated in the Song Dynasty (960AD–1279AD), due to increasingly conservative values in Chinese philosophy at the time. Intellectuals continued their attacks on the act of prostitution for centuries to come, cementing the belief that prostitution is morally wrong and that it brings social degradation to a nation.

By the Ming Dynasty (1368AD–1644AD), restrictions, punishments and laws were developed to control prostitution in China. This continued through the Qing Dynasty (1616AD–1912AD) until now.

Now, having spent a fair amount of time as a performing musician in many of Beijing’s bars has taught me something: This is a social and cultural phenomenon that will never disappear; however, the government’s efforts to suppress it won’t stop either.

We’re talking about all kinds of men going to karaoke bars and music bars for leisure or business. ‘Call girls’ earn their share of the profit, and the whole scene is controlled by the local ‘bad guys’. Yes, the local police pay these bars a visit periodically, but that doesn’t stop anything, especially with money changing hands.

Money

There is no escape from it; China’s new religion is ‘money’.

This is perhaps a triumph for capitalism over communism, but then again, China’s prosperity mentality is a deeply historical one. This is something that people constantly forget when thinking about China.

China remains an authoritarian one-party system. While in-party struggles are fierce, it has not compromised the country’s ability to be decisive and forceful.

What this means is while China operates largely around the orbit of Western economic philosophy, it is nowhere near a ‘free market’. So we need to look at China with the government in mind, interpreting its messages; while measuring how those messages are filtered through to the banking system, the industries and on down to average folk.

For example, with the government’s property curbs and moves on shadow banking, I can tell you they have had an effect, because property agents are quitting their jobs and a lot of shadow banks have closed down.

On the other hand, trust the government’s determination to achieve financial system liberalisation, and its will to starve out the oversupplied secondary industry sector.

However, don’t count on that smog to disappear anytime soon.

Social media

Social media is the new rock ‘n roll, and it is highly competitive.

Naver Corp’s [KRX:035420] CEO has come out to express that China’s market is a tough one to crack; while Renren [NYSE:RENN], China’s own answer to Facebook [NASDAQ:FB] has expressed they are not worried about dropping sales and a falling share price.

While the social media space is always evolving, I can tell you this much: Naver Corp is going to find it extremely hard to crack the China market without some major partnering in the ecosystem, and Renren is a company you want to forget about.

In my view there are other better opportunities worth looking at. This is part of the project Kris has tasked me to work on over the coming months. I’ll have more details for you soon.

Naver Corp’s ‘Line’ service is fairly popular in the Asian region outside China, but none of my Chinese contacts use Line. They use other services. As for Renren, its stock value plunged nearly 80% over the past three years, and there is a good reason for that…less people use it.

I can tell you personally that I had a Renren account three years ago; I haven’t touched it in a long time. I surveyed several people who have Renren accounts, all have said that they hardly use it, because they have switched to other services. One is a voice-message based social media platform; the other is a twitter equivalent.

Think and Know China

I hope that gives you some insight into what’s going on in China. In truth I’ve hardly scratched the surface. There is so much more to tell you about.

From an investing perspective, to pick a winning stock in China you have to assess the company in China’s own context.

The way I do that is to employ a multi-dimensional analysis framework by looking at culture, history, society, economy and politics. Most importantly, I try to put myself in the local investor’s shoes.

But that’s not enough. You also have to collect a lot of information, information that’s sometimes hard to access from outside of China. That means doing a lot of number crunching and financial modeling.

My point is, the way of the dragon is very different from what we are used to here in Australia and the West. It requires you to know more than just how to analyse a balance sheet. You also need to look at your potential investments differently.

Over the coming weeks I’ll introduce you to the inside picture on the Chinese economy and how you can use the information to your investing advantage.

Regards,
Ken Wangdong
Emerging Markets Analyst, Money Morning

Special Report: Mining Boom Act II

By MoneyMorning.com.au

By MoneyMorning.com.au

Medical equipment sales are going through the roof…

What was once just a U.S.-centric business is quickly spreading across the globe. According to one report, medical devices make up an industry that’s projected to reach $434.4 billion worldwide by 2017.

But in particular, one specific market is set to realize the biggest gains: China.

‘Within this largest of emerging economies dwells an expanding middle class that’s increasing in age and seeing improved medical insurance coverage,’ explains Rude researcher Noah Sugarman. ‘The Chinese medical equipment market already grows 15-20% annually, but that growth rate could look downright puny compared to its future growth prospects.’

Here’s the story…

The Chinese government recently launched a health reform program that aims to create a foundation for universal health care access by 2020 in a two-pronged effort committing close to the equivalent of $200 billion. That’s on top of already astronomical levels of government healthcare spending already in place in China.

Click to enlarge

‘Put that government funding alongside increasing demand from Chinese consumers and you’ve got the perfect catalysts for massive gains in market size,’ Noah explains…

‘All in all, the Chinese medical device market is projected to grow to $53.7 billion by 2015,” he continues. “And while medical equipment currently make up a little over 14% of the country’s total pharmaceutical industry, they’ve got the potential to see 40% market share in the near future – a percentage that most developed nations see.’

That means we could be smack on the ground floor of a massive new industry in the world’s most populated country. To put it into perspective, just imagine if you could’ve gotten on board the U.S. medical device market while it was still in its early stages…

This is one of the most exciting areas of the Chinese breakout that we’ll keep watching for new opportunities.

Regards,

Greg Guenthner
Contributing Editor, Money Morning

Ed. note: This article was originally published in The Daily Reckoning US.

By MoneyMorning.com.au