Timing & trends

By Randall Palmer

OTTAWA (Reuters) – The Canadian economy grew by 0.2 percent in May from April, according to Statistics Canada data on Wednesday, below forecasts and dampening expectations for the second quarter.

CLICK HERE for the complete article

The statement contained no new language on the conditions for maintaining the current pace of asset purchases. The Fed repeated the pledge it has used since September that it will continue the purchases until the U.S. labor market outlook has improved substantially. 

Policy makers also left unchanged their commitment to hold the target interest rate near zero as long as the jobless rate remains above 6.5 percent and the outlook for inflation over one to two years doesn’t exceed 2.5 percent.
 
Speculation about the Fed’s $85 billion in monthly bond purchases has whipsawed stocks since May, when Chairman Ben S. Bernanke first indicated policy makers could begin reducing the stimulus this year if the job market continues to improve.
 
A Commerce Department report earlier today showed that gross domestic product, the value of all goods and services produced, rose at a 1.7 percent annualized rate, after a 1.1 percent gain the prior quarter. The median forecast of 85 economists surveyed by Bloomberg called for a 1 percent advance for last quarter.

For anyone who sold physical gold in the current precious metal downturn, money manager Peter Schiff says, “There’s going to be a big problem because the gold they sold on the way down isn’t going to be available on the way back up because the people who own it aren’t going to sell it at any price. . . . This is the time to load the boat, to back up the truck.”

Ed Note: For a few more key transcripts and the entire 16 minute interview go HERE

The Potash Predicament

Posted by Mark Jasayko, MBA, CFA, Portfolio Manager

on Wednesday, 31 July 2013 17:26

McIver Wealth Management Consulting Group

We sold our position in Potash Corp (POT-TSX) back in 2011 after it was announced that BHP Billiton was seeking to buy the Company. The premium looked too attractive to ignore. Subsequently, we purchased Agrium (AGU-TSX) which we continue to hold. Not only did we deem AGU to be fairly priced, but it also had some features that made it stand out. It had far less direct exposure to the price of potash and it had a substantial retail division which provided insight into local demand for fertilizer. Also, because of the importance of food politics, especially in the Developing World, we were reluctant to reduce our exposure to global agriculture. Food inflation has been enough to trigger protests and revolutions in the Middle East and Asia over the last couple of decades. Governments concerned about their own survival are willing to pay a very high price in order to keep food costs contained. Whether it is crop yield technologies, food processing and distribution, or fertilizer, there will be a steady source of demand for these things for the foreseeable future.

With the news that the Russian potash giant Uralkali is leaving the global cartel and is expected to flood the global market for potash regardless of price, AGU has taken a bit of a hit. However, because of AGU’s diversification and retail operations, it was not hit as hard as the more pure potash plays such as POT and Mosaic (MOS-NYSE).

This news also highlights the issues surrounding the attempt by the New York hedge fund JANA Partners to break up AGU back in April, separating the wholesale operations from the retail operations. We voted against the proposal to break it up since AGU’s diversification was one of the reasons for buying it. And, now with the announcement of the collapse of the global potash pricing cartel, we believe that AGU integrated strategy limited the overall impact compared to the sum effect had the Company been divided in two.

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.

Gold and Gold Stocks – An Important Week

Posted by Pater Tenebrarum - Acting Man

on Wednesday, 31 July 2013 17:09

HUI-2000-2001

The Perverse Focus on the FOMC and Jobs Data

This week will bring the types of news that are generally considered to be among the most important for gold – the FOMC statement, as well as the July payrolls report (which in turn derives its perceived importance from its effect on central bank policy). It should be pointed out here that it actually makes very little sense for the market to focus on these data points (even though it is clear that the focus exists and cannot be ignored).

Let us consider the payrolls report first: what does it actually tell us? In reality it is a fairly meaningless datum. Not only is it merely an account of the past, it is not even a particularly precise account of the past. The report gets revised several times (at least thrice if memory serves, with the final revisions being done a full year after the report’s first publication, when the BLS does its annual revisions). Even the thrice revised version of the report isn’t really all that meaningful. After all, the employment statistics are collated in such a manner that all those who are long-term unemployed and considered ‘discouraged’ are simply no longer counted as unemployed, even though that is what they are. Lastly, even if there were some way of obtaining a perfect payrolls report, it would not really mean much or tell us anything about the future. Employment is a lagging economic indicator. The economy could well be in recession already, even in the face of employment data that still ‘look good’.

That is in fact what happened in late 2007: in hindsight it was determined that the economy entered a recession in late 2007, even though most of the real time economic data releases at the time – including payrolls data –  appeared to still look fine. In fact, the Fed, whose reaction to economic data is what the market really cares about, still proclaimed in summer of 2008 that the US economy was likely to ‘avoid a recession’. At the time, the recession had been in train for more than half a year already. In short, the Fed is not only incapable of forecasting an economic downturn, it is not even able to recognize a recession that is staring it right into the face.

Now let us consider the FOMC statement, which this month may contain news about the planned ‘tapering’ of ‘QE’ as well as refined ‘forward guidance’ regarding the Fed’s interest rate manipulations. Fresh Hilsenblather to that effect has been published late last week, entitled: “Up for Debate at Fed: A Sharper Easy-Money Message”. Apparently we need a more forceful reminder that there will be easy money for as far as they eye can see, or for however long it takes for easy money to bring the economy to utter ruin, whichever comes first.

A pertinent excerpt: