August 17, 2012

By Kevin Michael Grace

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Gold was up (at press time) $1.70 (+0.1%) for the week to $1,616.70, and silver was up $0.29 (+1%) to $28.23. According to Business Recorder August 16, “Gold prices firmed on Thursday on speculation that central banks may be set to launch more bullion-friendly stimulus measures to boost growth, though mixed US data that dampened expectations for imminent Federal Reserve action kept prices in a range [just over $1,600].”

According to economists surveyed by Reuters, the odds of QE3 are “about three in five.” Ambrose Evans-Pritchard writes, “Markets are pricing in an 80% chance of yet more printing by the US Federal Reserve in September or soon after.” And “China is sufficiently alarmed by the flint hardness of its ‘soft-landing’ to talk up trillions of fresh stimulus. The European Central Bank is preparing to print ‘whatever it takes’ to save Spain and Italy.” Meanwhile, “Five years on, the Great Recession is turning into a life sentence.”

What about the US “recovery” that Vice President Joe Biden is raving on about? (Watch this video, and you will see that the word “raving” is used advisedly.) According to Gary Shilling, “We’ve had three consecutive months of declines in retail sales. That’s happened 29 times since they started collecting the data in 1947, and in 27 of the 29 we were either in a recession or within three months of it.” The Daily Ticker reports, “Shilling expects this recession will last about a year and shave about 3.5% from growth from peak to trough.”

Tweedledum and Tweedledee: "If you think we're alive, you ought to speak."

As noted in this space a year ago, Bernancus Magnus will be forced to resort to QE3 because, based on his own Bernanke Doctrine, that’s all he can do. Actually, there is one final trick left up his sleeve, “dollar depreciation by stealth: wholesale purchases of foreign currencies.” Evans-Pritchard concludes, ominously, “Much of [our] debt will have to be written off. Whether this is done by inflation (1945-1952) or default (1930-1934) will be the great political battle of this decade. Pick your side. Pick your history.”

Do you hear our politicians speaking about this? Not a bit of it. In the United States, the presidential election is once again solely a contest of personalities: Barack Obama, who represents New America (yay!) versus Mitt Romney, who represents Old America (boo!).

Biden, who represents Crazy America, thunders that Romney is “gonna let the big banks again write their own rules. Unchain Wall Street!” According to Jean-Claude Groulx in the American Thinker, Wall Street has been remarkably unfettered under Biden’s boss. He notes that the Government Accountability Institute has reported that the George W Bush administration “obtained over 1,300 corporate fraud convictions, including those of over 130 corporate vice presidents and over 200 CEOs and corporate presidents,” and the Bill Clinton administration “prosecuted over 1,800 S&L (savings and loans) executives, senior officials, and directors, and over 1,000 of them were sent to jail.” The Obama administration, in contrast, “has not brought criminal charges against a single major Wall Street executive.”

Certainly not Jon Corzine. The New York Times reports August 15, “A criminal investigation into the collapse of the brokerage firm MF Global and the disappearance of about $1 billion in customer money is now heading into its final stage without charges expected against any top executives.” Why so? “Chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear.” Hey presto! Now you see it; now you don’t.

Of course that decision has nothing to do with the following: “Corzine is not only a former Senator (and Governor of New Jersey) but is also a former CEO of Goldman Sachs (where he employed Gary Gensler, current Chairman of the Commodity Futures Trading Commission), is ascloseasthis to the Democratic Party and is the man President Obama called ‘our Wall Street guy.’” And he’s still Obama’s guy… Corzine has raised at least $500,000 for [the Obama-Biden] re-election campaign, funds that President Hope and Change does not regard as at all tainted.”

Don’t expect Romney to make anything of this. If he did, he would have to answer questions about his VP pick, Paul Ryan, who trousered a tidy sum based on insider information he garnered as a congressman during the 2008 meltdown.

Of all the binary divisions in life—cats vs dogs, Coke vs Pepsi, Yankees vs Red Sox, Microsoft vs Apple, etc—Democrat vs Republican (or insert national variation here) is the least important. The politicians of all parties belong primarily to the Government Party. Their loyalties are not to classes, factions, regions or (ha! ha!) the commonweal; their only loyalty is to themselves—and the bankers like Jon Corzine who fund their hegemony. To speak of the calamities that threaten their nations would suggest that they have been consistently and woefully wrong in their policies, and they can’t have that. So pick your poison, inflation or default. Either is excellent news for gold.

Stock Tips and Joke of the Week

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August 25, 2011

By Kevin Michael Grace

There were numerous explanations for gold’s collapse from $1,900 an ounce this week. One of the most popular, yet curious, reasons, as expressed by Eric Lam of the National Post Wednesday, was that investors had “engaged in profit-taking ahead of a critical speech by US Federal Reserve Chairman Ben Bernanke.” Reuters put it slightly differently. “Gold fell sharply as investors took an optimistic view of how clearly the Federal Reserve will commit to supporting the economy at a gathering this week.”

One is tempted to compare the Ben Bernanke’s power and influence to that of a Roman emperor or a medieval pope, but one doesn’t want to underestimate the man. As Catherine Hollander of the National Journal declares, “All eyes will be on [him] when he takes the podium on Friday morning at the central bank’s annual confab in Jackson Hole, Wyoming.”

And what can we expect from this titan tomorrow? Tell us, Reuters. “While many doubt Bernanke will immediately commit to conducting a third round of quantitative easing, investors generally expect him to stress that the central bank stands ready to act if necessary.” Not exactly Henry V at Agincourt, is it? More like, QE3 if necessary, but not necessarily QE3.

OK then, let’s hear from JP Morgan Chase. “Unless there is a major geopolitical event or an utter meltdown in the market next Friday, there will be no new policy announcement.” Oh, come on. Surely there must be more to the Ben Bernanke’s pronunciamiento than that? Back to you, Catherine Hollander. “Analysts do expect the Fed chair…” Yes, yes, out with it. “…to keep his options open for future action.”

So gold collapsed in order that the Chairman of the Federal Reserve could do his best impersonation of Aesop. “A mountain was once greatly agitated. Loud groans and noises were heard, and crowds of people came from all parts to see what was the matter. While they were assembled in anxious expectation of some terrible calamity, out came a Mouse.”

In the event, there is little more that Bernanke could do, as he has already implemented six of the seven measures that make up the Bernanke Doctrine. He has increased the money supply, ensured financial liquidity, lowered interest rates to 0%, controlled the yield on corporate bonds, depreciated the US dollar and bought US industries with newly-created money. The only measure Bernanke hasn’t tried is dollar depreciation by stealth: wholesale purchases of foreign currencies. Ambrose Evans-Pritchard suggests Bernanke may be about to do just that and bail out the European Union at the same time, by snapping up EU bonds.

The cost of ensuring liquidity was $1.2 trillion. This was kept secret, oddly enough, until this week and was revealed by Bloomberg only after recourse to “data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.” Morgan Stanley got $107.3 billion in loans, Citigroup $99.5 billion and the Bank of America $91.4 billion. According to former Justice Department official Robert Litan, “These are all whopping numbers. You’re talking about the aristocracy of American finance going down the tubes without the federal money.”

And this largesse funded by American taxpayers was not limited to American institutions. Royal Bank of Scotland got $84.5 billion, Switzerland’s UBS got $77.2 billion, and Germany’s Hypo Real Estate Holding AG got $28.7 billion.

Bernanke was given carte blanche, but the American and world economies remain as sickly as ever. In particular, the Bank of America looks more than a little green around the gills. Commenting on the $5-billion surprise investment in BOA made by the “Oracle of Omaha” (and The Office guest star) Warren Buffett, Ian Bezek noted that only a month earlier, CEO Brian Moynihan was insisting, “We don’t need to raise capital.” Considering the terms Buffett got (“guaranteed 6% annual return on his preferred shares” and “700 million warrants convertible to stock at $7.14/share for free”), Bezek concludes that the deal “reeks of desperation.” The market was not entirely persuaded, either. BOA shares opened at $6.99 today, rose to $8.80, then fell to $7.65.

In totally unrelated news, the New York Post reports that President Obama (remember him?) telephoned Buffett from his Martha’s Vineyard redoubt to consult with him about the economy and that Buffett will host a re-election fundraiser for Obama September 30. The cost: $10,000 to $38,500 per plate. Hurry, hurry, while tickets last!

At press time, gold had risen to $1,782.90, with silver at $40.94. Non-Bernanke related reasons for gold’s fall include “a healthy and expected correction,” three swingeing increases in margin calls and Bill Murphy’s accusation (in a Resource Clips interview today) of “typical gold cartel” chicanery.

Gold remains up $350 from the beginning of the year, yet gold stocks have stubbornly refused to follow. This is a dispiriting time for junior miners. When gold and silver bullion soar, gold and silver equities tank. When gold and silver bullion tank, gold and silver equities tank harder. In the Globe and Mail Wednesday, David Berman lamented, “The sharp decline in gold and gold stocks comes just a day after we highlighted an analyst’s report on why gold stocks were trailing gold itself, and why that might present a good opportunity for investors. That thesis, though, relied upon a stable or rising price for gold. With gold now falling, it seems that Canadian gold producers are happy to take the lead.”

Berman’s Tuesday report includes Royal Bank analyst Stephen Walker’s recommendation of four mid-cap gold shares he believes can buck the trend: Centerra Gold, Eldorado Gold, Osisko Mining and Yamana Gold.

Also at the Globe, Celine Gaño lists three small-cap precious metals stocks to watch: Defiance Silver, Galantas Gold and Marathon Gold.

At the Financial Times, Bernard Simon notes, “Exploration companies have staked more than 85,000 claims in the [Yukon] territory since January, compared with 83,000 for the whole of 2010 and 10,000-15,000 in a normal year.” Marc Sontrop of Interward Asset Management declares, “Another gold rush is in the works.” Its largest Yukon holding is Atac Resources.

At the Gold Report, Carlos Andres, publisher of Frontier Research Report, identifies three “bargain basement gold stocks”: Sulliden Gold, Gran Colombia and Crocodile Gold.

And at the Financial Post, Peter Koven features Endeavour Mining, which is to merge with Adamus Resources of Australia, a deal which should highlight “the attractiveness of West Africa’s gold industry and set the stage for further consolidation in the red-hot region.”

Finally, Bill Clinton, the walking, talking, fornicating embodiment of the Bob’s Big Boy mascot, has become a vegan. How long before the first of the seven seals is opened?

March 25th

By Kevin Michael Grace

Sing a song of sixpence,
A pocket full of rye.

Bob Moriarty tells the Gold Report March 14 that the chaos in the Arab world has nothing to do with religion or democracy but is instead the result of the cost of bread. He blames Ben Bernanke: “He says that the Federal Reserve’s second round of quantitative easing, QE2, has nothing to do with the cost of fuel and food. Of course it does… When people are hungry, they start riots.”

Moriarty sees blackbird pie on the menu in America real soon and a governmental collapse to follow. He foresees stability returning only with the return of solid money: gold and silver. When it is put to him that “you can’t eat gold or silver,” he responds, “You could trade it for food.” And there are many other things you can do with it, as we shall see.

It’s easy enough to dismiss Moriarty as a hysteric. In the Globe and Mail March 23, Charles Lemonides, chief investment officer of ValueWorks sees gold falling to $400. He explains that with gold producers enjoying a $900 to $1000 profit on each ounce, supply will catch up with demand and burst the bubble. In other words, the price of gold has become “divorced from economic fundamentals.” But it would appear that baser motives, not Economics 101, are driving the prices of precious metal. Even Lemonides concedes that gold could reach a short-term high of $2,500.

At press time, gold was at $1,432 and silver at $37.42. As Reuters noted, March 24, gold reached a record high Thursday before falling back, and silver briefly reached a 31-year high. Both metals have fully recovered and more from the selloff after the Japan earthquake, which bears saw as the beginning of a substantial “correction.”

According to Dennis Gartman, publisher of the Gartman Letter, “The world wants to own any kind of hard assets. There is plenty of liquidity in the system created by the Fed and by the Bank of Japan. That money, in the interim, is finding its way into equities and into gold.” BNP Paribas analyst Anne-Laure Tremblay added, “The gold price is currently supported by safe-haven demand, stemming from three current crises–Libya and more generally unrest in the Middle East/North Africa region, Japan and renewed concerns over the periphery of Europe, particularly Ireland and Portugal.”

European stocks rose when Portugal’s Premier Jose Socrates resigned Thursday, raising hopes for a bailout. Be careful what you wish for. In Ireland, the Examiner reports March 25 that its government “is facing weeks of delicate negotiations to convince the EU to share the crippling cost of the banks and reduce the interest rate being charged for the bailout loan.”

In America, Bernanke’s helicopter continues to disgorge money, but little of it is finding its way into real estate. Reuters reports March 23 that February new home sales fell 16.9% “to a seasonally adjusted 250,000 unit annual rate, the lowest since records began in 1963.” Thankfully, economists “did not believe a new downturn in the housing market was under way.” Some, apparently (and curiously) “suggest[ed] bad weather might have been a factor.

CNBC suggests a different reason March 24: “The US ranks near the bottom of developed global economies in terms of financial stability and will stay there unless it addresses its burgeoning debt problems, a new study has found.”

Gold and silver may be safe havens for investors, but Latin America is increasingly no longer a safe haven for miners. “Canadian miners under siege in Colombia,” a Globe and Mail headline shouts March 21, referring to the failure of Greystar Resources’ Angostura gold-silver project to win environmental approval. The story also notes the takeover of Ventana Gold by a Brazilian company and that “Inmet Mining took a hit after the Panamanian government announced its plan to repeal a mining law that allows foreign ownership of mining projects within its borders.”

West Africa remains mining-friendly, and Darcy Keith writes in the Globe March 18, “If you’re placing bets on who may be the next company to be snapped up, Desjardins Securities Inc analyst Brian Christie suggests considering Semafo Inc …Christie… rates the stock a ‘buy’ with a price target of $14.75.”

At Seeking Alpha March 24, Rougement names six gold takeover targets—”solid companies that appear undervalued and likely to rise whether or not they are acquired”: Northgate Minerals, Yamana Gold, Crocodile Gold, Kinross Gold, Golden Star Resources and Taseko Mines.

Finally, the Financial Times reveals March 21 the name of the world’s biggest and most controversial gold bug: Colonel Muammer Gaddafi. According to the IMF, he holds 143.8 tonnes of it, “although some suspect the true amount could be several tonnes higher.” A sanction-proof investment, this is “worth more than $6.5bn at current prices, enough to pay a small army of mercenaries for months or even years.” The FT adds that Iran is also stocking up on the metal that has become the mandatory accoutrement for today’s embattled despot. A safe haven, indeed.

1. $5,852,176 Continental Gold Limited
   TSX:CNL
2. $442,455 Crocodile Gold Corp
   TSX:CRK
3. $68,540 Titan Uranium Inc
   TSXV:TUE
4. $30,000 Rockridge Capital Corp
   TSXV:RRC
5. $28,615 New Hana Copper Mining Ltd
   TSXV:HML