Bonds & Interest Rates

Faber: Interest Rates The Real skeleton in the closet of the Economy

Posted by Marc Faber - GloomBoomDoom.com

on Thursday, 19 September 2013 21:23

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Yellen to Make Bernanke Look Like Hawk

“She will make Mr. Bernanke look like a hawk. She, in 2010, said if could vote for negative interest rates, in other words, you would have a deposit with the bank of $100,000 at the beginning of the year and at the end, you would only get $95,000 back, that she would be voting for that. And that basically her view will be to keep interest rates in real terms, in other words, inflation-adjusted. And don’t believe a minute the inflation figures published by the bureau of labor statistics. You live in New York. You should know very well how much costs of living are increasing every day. Now, the consequences of these monetary policies and artificially low interest rates is of course that the government becomes bigger and bigger and you have less and less freedom and you have people like Mr. De Blasio, who comes in and says let’s tax people who have high incomes more. And, of course, immediately, because in a democracy, there are more poor people than rich people, they all applaud and vote for him. That is the consequence.”

“We Are in ‘QE Unlimited”

 “On September 14, 2012, when the Fed announced QE3, that was then extended into QE4, and now basically QE unlimited, the bond markets had peaked out. Interest rates had bottomed out on July 25, 2012–a year ago–at 1.43% on the 10-year Treasury note. Mr. Bernanke said at that time at a press conference, the objective of the Fed is to lower interest rates. Since then, they have doubled. Thank you very much. Great success.” 

Fertilizer: Another Hard Asset to Fight the Fed

Posted by Investor Intel & 321Gold

on Thursday, 19 September 2013 19:58

Global population is exploding and demand to feed this growing population is in the early stages of an exponential uptrend.

Potash is a key non-replaceable ingredient in fertiliser, the primary commodity used by farmers worldwide to increase the yield of their fields. Crops that not only deliver fruit, vegetable and grains to the dinner table, but also feed chicken, pork and beef stocks that an ever growing population are demanding.

Companies in the business:

Screen Shot 2013-09-19 at 12.55.50 PM

….read more of this authors opinion of companies worth investing in HERE

Feeding the World

by Bob Moriarty 321Gold.com

“Phosphate is a rock that is chemically treated to become phosphate fertilizer. It takes almost two tons of phosphate rock to make one ton of fertilizer. Peak oil is real. Peak oil also means peak food. We have to increase the food grown on limited land to feed the increase in population. That means more use of fertilizer. Phosphate is desirable because of it’s phosphorous content needed for food production.”

….read more about a Canadian company in the business HERE

It was not too surprising that there is going to be no tapering for some very good reasons. The commencement of tapering would have led deliberately to bond yields rising, triggered by an increase in sales of government bonds to the public and at the same time escalating sales by foreign governments as they attempt to retain control over their own currencies and interest rates. This was the important lesson from floating the rumour of tapering in recent months.

The reason tapering was not going to happen is summarised as follows:

  1. Monetarists and therefore central bankers believe that rising bond yields and interest rates will strangle economic recovery. They want to see more robust evidence of recovery before permitting that to happen.
  2. Rising bond yields would have required the Fed to raise interest rates sooner rather than later to stem the flight of bank deposits from the Fed’s own balance sheet held as excess reserves, which only earn 0.25%.
  3. Importantly, the global banking system has too much of its collective balance sheet invested in fixed-interest bonds, and is also exposed to rising interest rates through interest rate swap derivatives. Tapering would almost certainly have precipitated a second bank crisis starting at the system’s weakest point.
  4. The cost of funding the US Government’s deficit would have risen, difficult when the debt ceiling has to be renegotiated yet again.
  5. Rising US interest rates will most probably destabilise emerging market currencies, risking a new Asian crisis.
  6. It is a bad time to shift the burden of government funding back into the markets, because foreign holders have shown they will sell into rising yields.

The Fed has reaffirmed that zero interest rates will be with us for some time to come. It simply has no choice: it has to play down the risk of inflation. The result will be more price inflation, which is bad for the dollar and good for gold. This was reflected in the US Treasury yield curve, where prices of long maturities fell yesterday relative to the short end.

The markets had wrongly talked themselves into believing that tapering was going to happen, when the rumour was no more than an experiment. In the process precious metals were sold, driven by increasingly bearish technical talk every time a support level was breached. It is hardly surprising therefore that the recovery in gold and silver prices last night was dramatic, with gold moving up $70 and silver by $2 from intra-day lows. It looks like a significant second bottom is now in place above the June lows and the bear position, coupled with the shortage of physical metal will drive prices in the coming weeks.

The implications of the Fed not going ahead with tapering are bad for the dollar and won’t stop bond yields at the long end from rising. It shows that the whole US economy is in a massive debt trap that cannot be addressed for powerful reasons. The reality is the expansion of cash and deposits in the US banking system is tending towards hyperinflation and is proving impossible to stop. That is the message from this week’s FOMC meeting, and I expect it to gradually dawn on investors world-wide in the coming weeks.

About the Author

Alasdair Macleod is head of research for GoldMoney. He also runs FinanceAndEconomics.org, a website dedicated to sound money and demystifying finance and economics. He has a background as a stockbroker, banker and economist. He can be contacted at Alasdair.Macleod@GMYF.org and followed on Twitter @MacleodFinance.Alasdair Macleod

 

Opportunities in Frontiers of Science

Posted by Life Sciences via Streetwise Reports

on Thursday, 19 September 2013 18:41

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Hidden Finds from the edge of Biotech & Neurotechnology….

Four Small-Cap Growth Names with Different Value Drivers: Keay Nakae
Source: George S. Mack of The Life Sciences Report  (9/19/13)
It’s important to take the emotion out of investing. Keay Nakae, senior research analyst with Ascendiant Capital Markets, looks at micro- and small-cap biotech stocks from an engineer’s perspective: It’s all about the data. In this interview with The Life Sciences Report, Nakae reports on four companies with upcoming catalysts that potentially position them for significant growth—and the ability to grab investors’ attention. More > 

Hidden Finds in Regenerative and Medical Technology: Jeff Cohen
Source: Peter Byrne of The Life Sciences Report  (9/12/13)
Ladenburg Thalmann & Co. Inc.’s Jeff Cohen regularly explores the frontiers of regenerative and medical technology looking for solid investment opportunities. In this interview with The Life Sciences Report, Cohen reveals promising finds in one of the world’s fastest-growing business sectors. From robotics to skin grafts, Cohen knows his science and his market. More > 

Griffin Securities’ Keith Markey Gives Performance Reviews on Four Favorite Biotech Names
Source: Peter Byrne of The Life Sciences Report  (9/12/13)
As science director for Griffin Securities, Keith Markey knows his way around the advanced technologies of the most promising research in biotech. In this interview withThe Life Sciences Report, Markey explains the science behind new developments in the antibiotic, diabetic and dermatological fields, highlighting ground-floor investment opportunities that investors will not want to miss. More > 

UnknownDigging Below the Surface of Neurotechnology: Casey Lynch
Source: George S. Mack of The Life Sciences Report  (9/5/13)
Neuroscience is about as complex as it gets. The central nervous system contains the brain and spinal cord, where hundreds of billions of neurons are located—and that doesn’t include the peripheral nervous system. Casey Lynch, managing director of NeuroInsights, works to make sense of both the disease processes affecting the nervous system and potential therapies that could help patients and enrich investors. In this interview with The Life Sciences Report, Lynch brings some clarity to the complexity, and speaks frankly about the wild goose that some Alzheimer’s disease investigators have been chasing. More > 

Scientific Conferences Create Buzz and Move Biotech Stocks: Michael King
Source: George S. Mack of The Life Sciences Report  (9/5/13)
It’s that time again. From Labor Day through the New Year, analysts jet off to conferences across the U.S. and Europe to hear data they’ve been waiting on for years. Michael King, managing director and senior biotechnology analyst at JMP Securities, has been at this game for almost two decades, and he has a firm grip on how data releases about molecules and their targets will affect the biotech stocks in his coverage. In this interview with The Life Sciences Report, King also names four growth companies making important advances in hematologic cancers. Just in time. More >

Bernanke Behind the Curve

Posted by Mark Jasayko, CFA, Portfolio Manager

on Thursday, 19 September 2013 18:27

McIver Wealth Management Consulting Group / Richardson GMP Limited
QE & Labor Force Participation Appear To Be Inversely Related

Yesterday, during his press conference to explain why he decided not to Taper the rate of Quantitative Easing (money-printing), Ben Bernanke mentioned that he was distressed by the fall in the U.S. Labor Force Participation rate.

It is a little late in the game for him to be noticing that. The U.S. Labor Force Participation Rate has been declining for years.

In fact, it has declined at a faster rate during the era of Quantitative Easing! QE appears to contribute to this problem

How might that be the case? It might be that QE degrades the labor market by encouraging companies to focus more on financing and investing activities (taking advantage of low interest rates) instead of operational activities which tend to require labor.

The Fed seems to be in a pickle with this one.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. 

Richardson GMP Limited, Member Canadian Investor Protection Fund.

Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.