I believe it is! While the stock markets and GOLD market have been rocked by the situation in Greece, which this morning turned into riots, behind the scenes, the precious metals market has demonstrated a certain resiliency that is only demonstrable by looking at some relative analysis.
In order for GOLD, and the underlying precious metals miners, to really take off, as we have been predicting, they must both divorce themselves from the stock market AND the dollar. That has already begun.
The dollar index, or DXY, as it is often referred to, bottomed in December, 2009 at a reading of 74. The index is computed by comparing the U.S. Dollar to a basket of 10 currencies. Unfortunately, the computation of the index is highly skewed towards the EURO, which represents nearly 60% of the weighting, followed by the YEN and POUND.
The EURO has been incredibly weak and speculation has begun that it will lose its regional reserve-currency status. As the DXY is relative, the weakness in the EURO shows up as STRENGTH in the DOLLAR. So, the DXY is a rather poorly constructed gauge.
Nonetheless, the DXY currently stands at about 84 - a roughly 15% increase in the last 4 months. GOLD's most recent interim top of $1,200 per ounce coincided with the bottom in the DXY.
However, GOLD, which bottomed in February at around $1,050 per ounce, has since climbed in a stair-step fashion reaching nearly $1,200 a couple of days ago, despite the ongoing strength in the DOLLAR.
So, we now have a clear and consistent pattern of a rising DOLLAR and rising GOLD.
As to the stock market, a better way to measure relative strength is to review the ratio of precious metals miners to the Standard & Poors 500 (SPX). The preferred index of miners is the "HUI", or the "Gold Bugs Index".
The ratio created by dividing the HUI by the SPX is an excellent measure of the relative strength of miners to the overall stock market. This ratio also peaked in December, 2009 at a reading of about 0.45. It then fell to a low of about 0.33 in late March.
Since then, the HUI/SPX ratio has risen to 0.38 and has broken above its 200 day moving average. Yesterday's onslaught only brought it down slightly. It has also completed what appears to be a "head and shoulders" bottom - a pretty reliable chart formation often signalling a low of major importance.
Like any chart pattern, an H and S top or bottom is only a method for improving the odds and far from "inflammable", as Archie Bunker might say. Nevertheless, it, in conjunction with the strength of GOLD relative to the DXY, suggests that a major shift is taking place in the underlying technicals of this market.
Add to that, the excellent fundamentals of record revenues and earnings being reported by the miners, and you have all you need to see the precious metals market embark on the hyperbolic growth phase we have repeatedly called for.
The couple-day meltdown is extremely common for this phase of a mania. Everytime it looks like GOLD is taking off and investor sentiment gets too bullish or confident, an extreme shock keeps everyone on their toes. It's also the reason I have consistently warned about the dangers of overtrading a market like this. Even "per"fessionals learn the folly in trying to time every turn. It's a great way to NOT make money even in a rising trend.
Thus, we are now set up for what I believe ought to be an excellent entry point. In no way do I believe that the last couple of days negated the bullish prospects.
Marko's Take
Our newest YouTube video entitled "Social In-Security: The Problem" will be available sometime today. You can access it by clicking http://www.youtube.com/markostaketv. I would also like to thank Bill Murphy's excellent LeMetropoleCafe newsletter. For all you GOLD-philes, it remains the best value for a newsletter out there. You can access it by clicking here http://www.lemetropolecafe.com/.
Wednesday, May 5, 2010
Tuesday, May 4, 2010
Government Sachs In The Cross-Hairs: What The Scandal Is All About
Goldman Sachs (GS), aka "Government Sachs" has been exposed for being what readers of Marko's Take, as well as anyone with a brain, already knew: the most corrupt and greedy institution on planet Earth! (But Marko... how do you REALLY feel?)
With so many allegations and opinions flying about, it's easy to get confused as to exactly what prompted the SEC complaint and how it relates to the Obama Administration's formerly cozy relationship with Government Sachs.
Goldman was accused of fraud by the Securities and Exchange Commission (SEC) in a lawsuit filed April 16. The SEC claims Goldman duped investors in a Collateralized Debt Obligation (CDO) called Abacus 2007-AC1, by failing to disclose that it was created with the help of hedge-fund firm Paulson & Co., which made a profit of about $1 billion when the investment collapsed in value. John Paulson became an overnight celebrity within the investment community by virtue of his huge score shorting the real estate market.
The CDO is a bet against the value of mortgages and the housing market overall. The securities themselves were allegedly created specifically to give hedge fund manager John Paulson a means to profit from the real estate meltdown. Goldman, for its part, put its own clients into these CDO's, which defaulted in droves.
Paulson and Goldman got rich as America and the world got poor.
Warren Buffett, the richest man in America, and the most hypocritical man in America, sees ABSOLUTELY NOTHING WRONG! Why should he? His investment in Goldman, made at terms not available to anyone BUT him, is in the money. What him worry? (But Marko... how do you REALLY feel?).
Goldman's defense filing included copies of six lawsuits, as well as a "demand letter" from the Louisiana Municipal Police Employees Retirement System, that the company's board launch an internal probe of "officers and directors responsible for the Abacus 2007-AC1 incident."
In addition, Goldman clients are up in arms, believing not only that they had been misled, but that GS used its trading operation to benefit itself at their expense. Goldman, trade against its clients for its own profit? You're kidding, right? NOT! (But Marko... how do you REALLY feel?).
Prosecutors have demanded trading records as part of a probe that has ensnared several hedge-fund managers, including Galleon Group founder Raj Rajaratnam.
The U.S. Attorney's office in Manhattan has alleged Mr. Rajaratnam was at the center of a massive insider-trading ring that generated millions of dollars in improper trades. Mr. Rajaratnam has denied wrongdoing.
The SEC move came as President Barack Obama is making a final push for financial reform in the Senate next week. “Wall Street titans still recklessly speculate with borrowed money,” he told supporters. “We cannot delay action any longer.”
And this explains the sudden ploy by President Obama to throw his cronies at "Government Sachs" under the bus. It's 2010, and the elections are coming up. How better to show the American people that you have their interests at heart? He's gotten what he can out of Goldman. They're no longer useful. No honor among thieves!
Suddenly, the market impression of GS has taken an extreme turn for the worse. Not only has its stock plunged, but now market fears that the cumulative effects of the SEC and the private lawsuits will imperil Goldman's excellent credit-worthiness.
The cost of insuring Goldman Sachs’ debt against default has risen to about the level of Morgan Stanley and Citigroup, two less profitable rivals, as Goldman’s regulatory woes take a toll on investors’ confidence and its standing on Wall Street.
Credit Default Swaps (CDSs) leapt to 160 basis points yesterday, a real market sign that this is no slap on the wrist, but a real threat to the most corrupt institution in the world. Couldn't happen to a better bunch of guys! And that's how I REALLY feel!
Marko's Take
Our newest video entitled "Social In-Security: The Problem" will be uploaded in the next 24 hours. You can access all our videos by clicking here: http://www.youtube.com/markostaketv.
With so many allegations and opinions flying about, it's easy to get confused as to exactly what prompted the SEC complaint and how it relates to the Obama Administration's formerly cozy relationship with Government Sachs.
Goldman was accused of fraud by the Securities and Exchange Commission (SEC) in a lawsuit filed April 16. The SEC claims Goldman duped investors in a Collateralized Debt Obligation (CDO) called Abacus 2007-AC1, by failing to disclose that it was created with the help of hedge-fund firm Paulson & Co., which made a profit of about $1 billion when the investment collapsed in value. John Paulson became an overnight celebrity within the investment community by virtue of his huge score shorting the real estate market.
The CDO is a bet against the value of mortgages and the housing market overall. The securities themselves were allegedly created specifically to give hedge fund manager John Paulson a means to profit from the real estate meltdown. Goldman, for its part, put its own clients into these CDO's, which defaulted in droves.
Paulson and Goldman got rich as America and the world got poor.
Warren Buffett, the richest man in America, and the most hypocritical man in America, sees ABSOLUTELY NOTHING WRONG! Why should he? His investment in Goldman, made at terms not available to anyone BUT him, is in the money. What him worry? (But Marko... how do you REALLY feel?).
Goldman's defense filing included copies of six lawsuits, as well as a "demand letter" from the Louisiana Municipal Police Employees Retirement System, that the company's board launch an internal probe of "officers and directors responsible for the Abacus 2007-AC1 incident."
In addition, Goldman clients are up in arms, believing not only that they had been misled, but that GS used its trading operation to benefit itself at their expense. Goldman, trade against its clients for its own profit? You're kidding, right? NOT! (But Marko... how do you REALLY feel?).
Prosecutors have demanded trading records as part of a probe that has ensnared several hedge-fund managers, including Galleon Group founder Raj Rajaratnam.
The U.S. Attorney's office in Manhattan has alleged Mr. Rajaratnam was at the center of a massive insider-trading ring that generated millions of dollars in improper trades. Mr. Rajaratnam has denied wrongdoing.
The SEC move came as President Barack Obama is making a final push for financial reform in the Senate next week. “Wall Street titans still recklessly speculate with borrowed money,” he told supporters. “We cannot delay action any longer.”
And this explains the sudden ploy by President Obama to throw his cronies at "Government Sachs" under the bus. It's 2010, and the elections are coming up. How better to show the American people that you have their interests at heart? He's gotten what he can out of Goldman. They're no longer useful. No honor among thieves!
Suddenly, the market impression of GS has taken an extreme turn for the worse. Not only has its stock plunged, but now market fears that the cumulative effects of the SEC and the private lawsuits will imperil Goldman's excellent credit-worthiness.
The cost of insuring Goldman Sachs’ debt against default has risen to about the level of Morgan Stanley and Citigroup, two less profitable rivals, as Goldman’s regulatory woes take a toll on investors’ confidence and its standing on Wall Street.
Credit Default Swaps (CDSs) leapt to 160 basis points yesterday, a real market sign that this is no slap on the wrist, but a real threat to the most corrupt institution in the world. Couldn't happen to a better bunch of guys! And that's how I REALLY feel!
Marko's Take
Our newest video entitled "Social In-Security: The Problem" will be uploaded in the next 24 hours. You can access all our videos by clicking here: http://www.youtube.com/markostaketv.
Monday, May 3, 2010
Asian Inflation Contagion?
While reported inflation figures in the United States and Europe remain tame, they are exploding in Asia. As we've discussed in prior blogs, China appears to be in the midst of a property bubble amid booming economic growth.
South Korea and Indonesia reported higher-than-expected inflation this morning, one day after China raised banking reserve requirements in an attempt to cool its overheating economy. In a sign that inflation is firmly taking root, core prices, which exclude volatile food and energy, are ticking up.
Australia, like China, is experiencing a rapid increase in property prices.
Australia reported today that housing prices rose 4.8% in the 1st quarter from the end of 2009 and are up 20% in its 8 large cities from the year earlier. The news, which heightened concerns that a bubble has formed there, may forsage a rise in interest rates when the Reserve Bank of Australia meets tomorrow.
Australian propety prices are vaulting upward with a 27.7% annual increase in Melbourne, 21% in Sydney and 15% in Perth.
Asia's economies are running at breakneck speed. Other indicators released today included positive readings in purchasing managers' indexes in Taiwan, Australia, South Korea and India. Retail sales in Hong Kong were strong.
South Korea's consumer price index rose 2.6% in April from a year earlier and 0.5% from the previous month. Core prices rose 1.5% in April from the previous year and 0.2% from March.
Indonesia said consumer prices there rose 3.9% from the year earlier period, while core inflation rose 3.7%. Thailand reported consumer prices rose 3% in April. Core inflation rose a modest 0.5% from the year before.
Countries experiencing double-digit annualized inflation include India, Turkey and Iceland.
One of the highest inflation readings is being experienced in Vietnam, with inflation exploding at an annual rate of 25% in April. The only exception in the region is Japan, which continues to be mired in deflation.
So, while the West has not YET seen the full impact of the un-precedented stimulus spending in prices, it will undoubtedly follow in Asia's footsteps, especially in light of the extended period of negative "real" interest rates (interest rates minus inflation).
With the backdrop of rising world inflation this can only be a major positive factor for GOLD. We continue to maintain our position that the hyperbolic growth phase for GOLD has begun and leaves plenty of time for investors to get on board.
Marko's Take
Please visit us on YouTube at http://www.youtube.com/markostaketv. Our newest video blog on Social Security, titled "Social In-Security: The Problem" will be loaded shortly. That will be followed by "Social In-Security: The Solution".
South Korea and Indonesia reported higher-than-expected inflation this morning, one day after China raised banking reserve requirements in an attempt to cool its overheating economy. In a sign that inflation is firmly taking root, core prices, which exclude volatile food and energy, are ticking up.
Australia, like China, is experiencing a rapid increase in property prices.
Australia reported today that housing prices rose 4.8% in the 1st quarter from the end of 2009 and are up 20% in its 8 large cities from the year earlier. The news, which heightened concerns that a bubble has formed there, may forsage a rise in interest rates when the Reserve Bank of Australia meets tomorrow.
Australian propety prices are vaulting upward with a 27.7% annual increase in Melbourne, 21% in Sydney and 15% in Perth.
Asia's economies are running at breakneck speed. Other indicators released today included positive readings in purchasing managers' indexes in Taiwan, Australia, South Korea and India. Retail sales in Hong Kong were strong.
South Korea's consumer price index rose 2.6% in April from a year earlier and 0.5% from the previous month. Core prices rose 1.5% in April from the previous year and 0.2% from March.
Indonesia said consumer prices there rose 3.9% from the year earlier period, while core inflation rose 3.7%. Thailand reported consumer prices rose 3% in April. Core inflation rose a modest 0.5% from the year before.
Countries experiencing double-digit annualized inflation include India, Turkey and Iceland.
One of the highest inflation readings is being experienced in Vietnam, with inflation exploding at an annual rate of 25% in April. The only exception in the region is Japan, which continues to be mired in deflation.
So, while the West has not YET seen the full impact of the un-precedented stimulus spending in prices, it will undoubtedly follow in Asia's footsteps, especially in light of the extended period of negative "real" interest rates (interest rates minus inflation).
With the backdrop of rising world inflation this can only be a major positive factor for GOLD. We continue to maintain our position that the hyperbolic growth phase for GOLD has begun and leaves plenty of time for investors to get on board.
Marko's Take
Please visit us on YouTube at http://www.youtube.com/markostaketv. Our newest video blog on Social Security, titled "Social In-Security: The Problem" will be loaded shortly. That will be followed by "Social In-Security: The Solution".
Sunday, May 2, 2010
Greece Austerity Deal Fuels Civil Unrest
It was bound to happen. As details of a widely anticipated plan to impose severe austerity measures were agreed to in exchange for a massive bailout by the European Union (EU) and the International Monetary Fund (IMF), violent protests broke out in Greece.
The entirety of the three-year IMF-EU package is expected to be announced in Brussels after an emergency Euro-Zone finance ministers' meeting. The aggregate amount is thought to be in the range of the previously reported figures of 120 billion Euros or $160 billion.
It remains unclear whether Sunday's meeting in Brussels will be enough to give final approval for Athens to start receiving the money or whether a summit of Euro-Zone heads of government will be required. In addition, stiff domestic disapproval in Germany and Greece remains a major stumbling block to any deal.
Under the austerity plan, annual holiday bonuses will be limited to 1,000 Euros ($1,330) per year for civil servants and completely eliminated for those with gross monthly salaries over 3,000 Euros ($3,995). Pensioners' bonuses will also be capped at 800 Euros and canceled for those paid more than 2,500 Euros ($3,330). Salary cuts will not extend to the private sector.
Taxes would also be increased, including further hikes on fuel, alcohol and tobacco. The top bracket of sales tax rises from 21% to 23%.
Finance Minister Papaconstantinou said his country's debt would reach 140 % of GDP in 2013 and start falling from 2014, while economic output is projected to contract by 4% in 2010 and by 2.6% in 2011 before it starts recovering slowly beginning in 2012.
MAY DAY protests in Greece turned violent yesterday as youths in gas masks and hoods set fire to vehicles, smashed shop fronts and threw Molotov cocktails and rocks at police in an explosion of fury over austerity measures they claim will hurt only the poor.
The violence came as negotiations were concluding between the socialist government of George Papandreou, the IMF and the EU over the rescue package.
Even greater social unrest is anticipated as resentment simmers among poorer families who are being told to tighten their belts when wealthy Greeks can protect their fortunes by moving their money abroad, some of it into property bargains in London.
Resentment among Greeks as being lazy and corrupt has hardened into outrage at Germany, whose leaders complain that the Mediterranean country should never have been allowed into Europe. Greeks were particularly angered by German suggestions that they sell their islands to pay off the debt.
German Chancellor Angela Merkel insisted on making the International Monetary Fund (IMF) part of any rescue and made German aid contingent on bolder austerity steps from Athens, delaying the rescue and underscoring deep divisions in the bloc.
The time remaining to complete the rescue is running out. Greece has nearly $10 billion in debt due by May 19, or risks default. While a solution is getting closer to being achieved, it is in no way a done deal. And, even if a deal is consummated, there is no way to be certain whether it will prove to be nothing more than a temporary fix.
Marko's Take
Please visit on YouTube at http://www.youtube/markostaketv. Our newest video, entitled "Social In-Security: The Problem will be posted shortly.
The entirety of the three-year IMF-EU package is expected to be announced in Brussels after an emergency Euro-Zone finance ministers' meeting. The aggregate amount is thought to be in the range of the previously reported figures of 120 billion Euros or $160 billion.
It remains unclear whether Sunday's meeting in Brussels will be enough to give final approval for Athens to start receiving the money or whether a summit of Euro-Zone heads of government will be required. In addition, stiff domestic disapproval in Germany and Greece remains a major stumbling block to any deal.
Under the austerity plan, annual holiday bonuses will be limited to 1,000 Euros ($1,330) per year for civil servants and completely eliminated for those with gross monthly salaries over 3,000 Euros ($3,995). Pensioners' bonuses will also be capped at 800 Euros and canceled for those paid more than 2,500 Euros ($3,330). Salary cuts will not extend to the private sector.
Taxes would also be increased, including further hikes on fuel, alcohol and tobacco. The top bracket of sales tax rises from 21% to 23%.
Finance Minister Papaconstantinou said his country's debt would reach 140 % of GDP in 2013 and start falling from 2014, while economic output is projected to contract by 4% in 2010 and by 2.6% in 2011 before it starts recovering slowly beginning in 2012.
MAY DAY protests in Greece turned violent yesterday as youths in gas masks and hoods set fire to vehicles, smashed shop fronts and threw Molotov cocktails and rocks at police in an explosion of fury over austerity measures they claim will hurt only the poor.
The violence came as negotiations were concluding between the socialist government of George Papandreou, the IMF and the EU over the rescue package.
Even greater social unrest is anticipated as resentment simmers among poorer families who are being told to tighten their belts when wealthy Greeks can protect their fortunes by moving their money abroad, some of it into property bargains in London.
Resentment among Greeks as being lazy and corrupt has hardened into outrage at Germany, whose leaders complain that the Mediterranean country should never have been allowed into Europe. Greeks were particularly angered by German suggestions that they sell their islands to pay off the debt.
German Chancellor Angela Merkel insisted on making the International Monetary Fund (IMF) part of any rescue and made German aid contingent on bolder austerity steps from Athens, delaying the rescue and underscoring deep divisions in the bloc.
The time remaining to complete the rescue is running out. Greece has nearly $10 billion in debt due by May 19, or risks default. While a solution is getting closer to being achieved, it is in no way a done deal. And, even if a deal is consummated, there is no way to be certain whether it will prove to be nothing more than a temporary fix.
Marko's Take
Please visit on YouTube at http://www.youtube/markostaketv. Our newest video, entitled "Social In-Security: The Problem will be posted shortly.
Saturday, May 1, 2010
First Quarter GDP Shows Recovery... But How Real Is It?
Yesterday, the preliminary estimate of 1st quarter Gross Domestic Product (GDP) was released, indicating an annualized growth rate of 3.2% - down from the 5.6% annualized rate for the 4th quarter of 2009. Within minutes, officials of the Obama Administration were all over the media declaring the recession over and trumpeting the efficacy of their various stimulus plans. Strangely, after blaming the weather for the lack of job growth in recent months, they failed to credit the weather for the excellent economic news.
As with any government economic report, the headline number is a facade to the real story underneath. Worry not. Marko's Take, along with our staff of experts, is here to dissect the report and reveal the truth as to what's really taking place.
Spending by consumers rose at a 3.6% rate, more than double the 4th quarter pace and faster than any quarter in the past three years. But half the quarter's growth came from firms rebuilding inventories.
Consumer spending, which accounts for about 70% of the demand in the economy, remains the key. Consumer confidence has improved quite a bit from the bottom of the financial crisis, but remains depressed. The University of Michigan's Consumer Sentiment Index, released Friday, dropped slightly to 72.2 in April from 73.6 in March — and was well below the pre-recession levels, which exceeded 90.
Friday's data showed reported inflation remains tame, even as the economy climbs out of recession. The Federal Reserve's preferred gauge, the price index for Personal Consumption Expenditures, or the PCE deflator, excluding food and energy, rose an annualized 0.6% in the 1st quarter, compared with the 4th quarter's 1.8%. The Labor Department's employment cost index, the broadest measure of wages and benefits, rose 0.6% in the first quarter from the fourth, and was 1.7% higher than a year earlier.
Long-time readers know that we are not only highly skeptical of any economic new emanating from Washington, but that we can see right through the BS. Fortunately, we have the brilliant Dr. Williams and his fantastic site ShadowStats (http://www.shadowstats.com/) to assist us in this endeavor.
According to ShadowStats, the Alternate-GDP estimate for first-quarter 2010 was an approximate annual CONTRACTION of 1.5%. This reflects the bottom-bouncing at low levels of activity seen for much of the last year in key underlying economic series, not an economic recovery.
More disturbing is the analysis performed by Dr. Williams on the Money Supply. With just more than two weeks of reporting on April money supply, weekly contractions in M2 (institutional money funds and large time deposits) suggest that the pace of decline in the broader M3 is accelerating, with the nominal year-to-year change reflecting a record annual decline of roughly 4.8% in April, versus a decline of roughly 3.7% in March, if weekly reporting showed no further changes for the balance April.
According to Dr. Williams, real year-to-year change appears likely to deteriorate from a 5.8% contraction in March to an unprecedented reading of a 7% annual decline. Contracting annual growth in broad money supply nearly always precedes decelerating economic activity.
The contraction is money supply aggregates also signals systemic difficulties in the banking system. A properly functioning U.S. banking system would be lending increasing amounts of money, not contributing to a slow downward spiral in consumer and business credit outstanding and a pending renewed decline in economic activity.
The best way to really gauge what's going on is to pay attention to what you see anecdotally. Are you having trouble keeping up? Are your friends and family struggling? Are you paying more for food and gas and critical goods? These are better indicators than what Washington reports. Ultimately, if the "good" news is helping you, that what "good" is it?
Marko's Take
The California Wildlife Center is having a 5K walk on Sunday, May 2nd in Malibu. I'll be there, with my fellow "whacko-tarians". For more information on this wonderful organization and cause, please click here http://www.californiawildlifecenter.org/.
As with any government economic report, the headline number is a facade to the real story underneath. Worry not. Marko's Take, along with our staff of experts, is here to dissect the report and reveal the truth as to what's really taking place.
Spending by consumers rose at a 3.6% rate, more than double the 4th quarter pace and faster than any quarter in the past three years. But half the quarter's growth came from firms rebuilding inventories.
Consumer spending, which accounts for about 70% of the demand in the economy, remains the key. Consumer confidence has improved quite a bit from the bottom of the financial crisis, but remains depressed. The University of Michigan's Consumer Sentiment Index, released Friday, dropped slightly to 72.2 in April from 73.6 in March — and was well below the pre-recession levels, which exceeded 90.
Friday's data showed reported inflation remains tame, even as the economy climbs out of recession. The Federal Reserve's preferred gauge, the price index for Personal Consumption Expenditures, or the PCE deflator, excluding food and energy, rose an annualized 0.6% in the 1st quarter, compared with the 4th quarter's 1.8%. The Labor Department's employment cost index, the broadest measure of wages and benefits, rose 0.6% in the first quarter from the fourth, and was 1.7% higher than a year earlier.
Long-time readers know that we are not only highly skeptical of any economic new emanating from Washington, but that we can see right through the BS. Fortunately, we have the brilliant Dr. Williams and his fantastic site ShadowStats (http://www.shadowstats.com/) to assist us in this endeavor.
According to ShadowStats, the Alternate-GDP estimate for first-quarter 2010 was an approximate annual CONTRACTION of 1.5%. This reflects the bottom-bouncing at low levels of activity seen for much of the last year in key underlying economic series, not an economic recovery.
More disturbing is the analysis performed by Dr. Williams on the Money Supply. With just more than two weeks of reporting on April money supply, weekly contractions in M2 (institutional money funds and large time deposits) suggest that the pace of decline in the broader M3 is accelerating, with the nominal year-to-year change reflecting a record annual decline of roughly 4.8% in April, versus a decline of roughly 3.7% in March, if weekly reporting showed no further changes for the balance April.
According to Dr. Williams, real year-to-year change appears likely to deteriorate from a 5.8% contraction in March to an unprecedented reading of a 7% annual decline. Contracting annual growth in broad money supply nearly always precedes decelerating economic activity.
The contraction is money supply aggregates also signals systemic difficulties in the banking system. A properly functioning U.S. banking system would be lending increasing amounts of money, not contributing to a slow downward spiral in consumer and business credit outstanding and a pending renewed decline in economic activity.
The best way to really gauge what's going on is to pay attention to what you see anecdotally. Are you having trouble keeping up? Are your friends and family struggling? Are you paying more for food and gas and critical goods? These are better indicators than what Washington reports. Ultimately, if the "good" news is helping you, that what "good" is it?
Marko's Take
The California Wildlife Center is having a 5K walk on Sunday, May 2nd in Malibu. I'll be there, with my fellow "whacko-tarians". For more information on this wonderful organization and cause, please click here http://www.californiawildlifecenter.org/.
Friday, April 30, 2010
The Greek Tweak: Will It Work?
This morning, the newswires were buzzing with reports of an austerity plan for Greece and an expanded loan facility from the International Monetary Fund (IMF). Athens has agreed to the outline of a €24 billion austerity package, including a three-year wage freeze for public sector workers, in return for a multibillion-Euro loan from the Euro-Zone and the IMF.
The austerity package also includes an increase in Greece's Value-Added Tax (VAT), the second this year. Public sector workers will lose their “13th and 14th month” salaries, paid days at Christmas and Easter and see further cuts in allowances. In other words, Greece's government employees will be required to work 14 months for 12 months of pay.
Greece’s abnormally large public sector, which employs about 13% of the workforce, will be gradually reduced through a recruitment freeze, the abolition of short-term contracts and closures of hundreds of outdated state entities. Pension benefits were to be frozen and/or deferred.
Final details of the measures, which were intended to slash the budget deficit by 10-11% of Gross Domestic Product (GDP) over the next three years, are still being worked out. Currently, Greece's budget gap is running at nearly 14% of GDP and is the central cause of the country's threatened insolvency.
Negotiations with officials from the IMF, the European Commission and the European Central Bank are due to be completed at the weekend and the measures will be presented for approval by the Greek parliament next week.
The IMF is looking at raising its share of Greece’s financial rescue package by another €10 billion ($13.2 billion) amid fears that the planned €45 billion bail-out will prove insufficient to curtail the country's sovereign debt crisis. The entire amount deemed necessary to save Greece is now €100-120 billion.
Politicians and economists across Europe have been highly critical of the slowness with which Euro-Zone governments have addressed the Greek crisis, which burst into the open more than six months ago with the disclosure that Greece’s 2009 budget deficit was far higher than previously believed.
The slowness partly reflects the unwillingness of Angela Merkel, Germany’s Chancellor, to commit Berlin to a multibillion-Euro rescue of Greece when German public opinion is against it and there is a risk of a legal challenge to the aid in Germany’s constitutional court.
Will the "Greek Tweak" work? Probably not. The magnitude of the austerity savings are fairly small by comparison to the bail-out needed. In addition, the Greek economy is already spiralling downward and further austerity measures will only deprive the economy of stimulus. In addition, Greek government employee unions will not be an easy sell, regardless of the magnitude of the problem. Finally, until Germany signs on, no deal can possibly be consummated.
The projected cost of the bail-out has nearly tripled in the last two months. Greece has been shut out of the capital markets. There is no reason to believe that all the bad news is on the table. The only real solution is a major restructuring of Greece's debt and a major economic change from the socialist policies which have created the inefficiencies that exist today.
Marko's Take
For Southern California readers interested in a good animal cause, the California Wildlife Center is having a 5K walk in Malibu to raise funds for this wonderful organization. For more information, click here http://www.californiawildlifecenter.org/. Hope to see you there!
The austerity package also includes an increase in Greece's Value-Added Tax (VAT), the second this year. Public sector workers will lose their “13th and 14th month” salaries, paid days at Christmas and Easter and see further cuts in allowances. In other words, Greece's government employees will be required to work 14 months for 12 months of pay.
Greece’s abnormally large public sector, which employs about 13% of the workforce, will be gradually reduced through a recruitment freeze, the abolition of short-term contracts and closures of hundreds of outdated state entities. Pension benefits were to be frozen and/or deferred.
Final details of the measures, which were intended to slash the budget deficit by 10-11% of Gross Domestic Product (GDP) over the next three years, are still being worked out. Currently, Greece's budget gap is running at nearly 14% of GDP and is the central cause of the country's threatened insolvency.
Negotiations with officials from the IMF, the European Commission and the European Central Bank are due to be completed at the weekend and the measures will be presented for approval by the Greek parliament next week.
The IMF is looking at raising its share of Greece’s financial rescue package by another €10 billion ($13.2 billion) amid fears that the planned €45 billion bail-out will prove insufficient to curtail the country's sovereign debt crisis. The entire amount deemed necessary to save Greece is now €100-120 billion.
Politicians and economists across Europe have been highly critical of the slowness with which Euro-Zone governments have addressed the Greek crisis, which burst into the open more than six months ago with the disclosure that Greece’s 2009 budget deficit was far higher than previously believed.
The slowness partly reflects the unwillingness of Angela Merkel, Germany’s Chancellor, to commit Berlin to a multibillion-Euro rescue of Greece when German public opinion is against it and there is a risk of a legal challenge to the aid in Germany’s constitutional court.
Will the "Greek Tweak" work? Probably not. The magnitude of the austerity savings are fairly small by comparison to the bail-out needed. In addition, the Greek economy is already spiralling downward and further austerity measures will only deprive the economy of stimulus. In addition, Greek government employee unions will not be an easy sell, regardless of the magnitude of the problem. Finally, until Germany signs on, no deal can possibly be consummated.
The projected cost of the bail-out has nearly tripled in the last two months. Greece has been shut out of the capital markets. There is no reason to believe that all the bad news is on the table. The only real solution is a major restructuring of Greece's debt and a major economic change from the socialist policies which have created the inefficiencies that exist today.
Marko's Take
For Southern California readers interested in a good animal cause, the California Wildlife Center is having a 5K walk in Malibu to raise funds for this wonderful organization. For more information, click here http://www.californiawildlifecenter.org/. Hope to see you there!
Thursday, April 29, 2010
American Barrick Follows Newmont Mining With Blowout Earnings
Now that earnings season is in full swing, precious metals miners are continuing to report excellent earnings. Yesterday, giant American Barrick (ABX) reported, followed by Goldcorp. (GG) and Hecla Mining Company (HL).
ABX reported record first quarter net income of $758 million ($0.77 per share), an increase of nearly 150% from the first quarter of 2009. The increase was attributable to higher production and sales in conjunction with lower total cash costs and higher realized prices for both gold and copper. Operating cash flow more than tripled to a record $1.05 billion from $349 million in the same prior year period.
Gold production was up 19% to 2.08 million ounces at total cash costs of $442 per ounce, which was $42 per ounce below prior year period total cash costs. The Company is on track with its guidance to increase production in 2010 to 7.6-8.0 million ounces at lower total cash costs of $425-$455 per ounce.
ABX continues to maintain a strong financial position and the industry's only 'A' credit rating with quarter-end cash of $3.5 billion, an undrawn credit facility of $1.5 billion, robust operating cash flow and excellent access to debt markets.
Goldcorp said on Wednesday its adjusted profit slipped by 3.9%, missing analysts' estimates, as the timing of sales and the stronger Canadian dollar raised costs and offset the impact of higher gold prices. However, this was in large part the result of a non-cash foreign exchange loss of $211.8 million on a translation of future income tax liabilities.
Stripping out the charge, adjusted profit was $162.7 million, or 22 cents a share, down from $169.3 million, or 23 cents per share in the year-before period. Nevertheless, GG remains on track.
Revenue rose 20% to $750.3 million as realized gold prices rose 21.7% to $1,110 an ounce. Cash costs per ounce climbed to $325 per ounce from $288, when using by-product metals production as a cost offset.
The strong year-over-year gains by the Canadian dollar and Mexican peso stripped a total of $25.9 million from the bottom line, while results were also hurt by delayed sales at the Red Lake mine in Canada and a port strike that delayed gold and copper sales at the Alumbrera mine in Argentina.
Hecla Mining reported net income applicable to common shareholders of $18.4 million or 8 cents per share during the first quarter of this year, a substantial increase from the $3.9 million or 2 cents per year reported during the first quarter of 2009.
The company is maintaining its previously announced full-year production guidance of 10 million to 11 million ounces of silver with cash costs in the range of $1.90 to $2.25 per ounce. Hecla is debt-free with $116 million of cash.
As GOLD gets primed to enter its hyperbolic growth phase, excellent revenue growth and profits are being realized. Unlike the NASDAQ bubble, the mania phase in miners will be supported by bona-fide fundamentals.
Marko's Take
Please visit us on You Tube at http://www.youtube.com/markostaketv. Our latest video on the Legality Of The Personal Income Tax can be accessed by clicking here (http://www.youtube.com/markostaketv#p/u/0/1TInKnCIikg).
ABX reported record first quarter net income of $758 million ($0.77 per share), an increase of nearly 150% from the first quarter of 2009. The increase was attributable to higher production and sales in conjunction with lower total cash costs and higher realized prices for both gold and copper. Operating cash flow more than tripled to a record $1.05 billion from $349 million in the same prior year period.
Gold production was up 19% to 2.08 million ounces at total cash costs of $442 per ounce, which was $42 per ounce below prior year period total cash costs. The Company is on track with its guidance to increase production in 2010 to 7.6-8.0 million ounces at lower total cash costs of $425-$455 per ounce.
ABX continues to maintain a strong financial position and the industry's only 'A' credit rating with quarter-end cash of $3.5 billion, an undrawn credit facility of $1.5 billion, robust operating cash flow and excellent access to debt markets.
Goldcorp said on Wednesday its adjusted profit slipped by 3.9%, missing analysts' estimates, as the timing of sales and the stronger Canadian dollar raised costs and offset the impact of higher gold prices. However, this was in large part the result of a non-cash foreign exchange loss of $211.8 million on a translation of future income tax liabilities.
Stripping out the charge, adjusted profit was $162.7 million, or 22 cents a share, down from $169.3 million, or 23 cents per share in the year-before period. Nevertheless, GG remains on track.
Revenue rose 20% to $750.3 million as realized gold prices rose 21.7% to $1,110 an ounce. Cash costs per ounce climbed to $325 per ounce from $288, when using by-product metals production as a cost offset.
The strong year-over-year gains by the Canadian dollar and Mexican peso stripped a total of $25.9 million from the bottom line, while results were also hurt by delayed sales at the Red Lake mine in Canada and a port strike that delayed gold and copper sales at the Alumbrera mine in Argentina.
Hecla Mining reported net income applicable to common shareholders of $18.4 million or 8 cents per share during the first quarter of this year, a substantial increase from the $3.9 million or 2 cents per year reported during the first quarter of 2009.
The company is maintaining its previously announced full-year production guidance of 10 million to 11 million ounces of silver with cash costs in the range of $1.90 to $2.25 per ounce. Hecla is debt-free with $116 million of cash.
As GOLD gets primed to enter its hyperbolic growth phase, excellent revenue growth and profits are being realized. Unlike the NASDAQ bubble, the mania phase in miners will be supported by bona-fide fundamentals.
Marko's Take
Please visit us on You Tube at http://www.youtube.com/markostaketv. Our latest video on the Legality Of The Personal Income Tax can be accessed by clicking here (http://www.youtube.com/markostaketv#p/u/0/1TInKnCIikg).
Subscribe to:
Posts (Atom)