David McALvany : With over 40 central banks setting rates at or near zero percent, there is the potential for problems to arise in almost every part of the globe, and perhaps this fits the earlier question: Where would you see opportunities, where would you see risks, and should we have any concerns lingering in terms of the old inflation versus deflation debate?Energy & Commodities
Rapidly advancing technologies are opening up astonishing sources of oil and gas all over the world. We are entering a new era of fossil fuels that is reshaping global economics and politics—and the planet.
The Chevron Field Above
Thanks to revolutionary, breakthrough drilling technologies, we have entered a new era of fossil fuels according to this article in the Pacific Standard, and the energy revolution is reshaping global economics and politics — and the planet:
In 1922, a federal commission predicted that “production of oil cannot long maintain its present rate.” In 1977, President Jimmy Carter declared that world oil production would peak by 1985.
It turns out, though, that the problem has never been exactly about supply; it’s always been about our ability to profitably tap that supply. We human beings have consumed, over our entire history, about a trillion barrels of oil. The U.S. Geological Survey estimates there is still seven to eight times that much left in the ground. The oil that’s left is just more difficult, and therefore more expensive, to get to. But that sets the invisible hand of the market into motion.
Every time known reserves start looking tight, the price goes up, which incentivizes investment in research and development, which yields more sophisticated technologies, which unearth new supplies — often in places we’d scarcely even thought to look before.
….read full article HERE
Spending Patterns Paint Half Truth
by John Browne Euro Pacific Capital
On March 13th, the Commerce Department announced a 1.1 percent increase in food and services retail sales, doubling a prior Dow Jones survey of economists that forecast an increase of just 0.6 percent. This new data has led to a fresh wave of enthusiastic commentaries that the US economy is set for a strong recovery. Less examined were the underlying factors that supported the increase.
Through the persuasive powers of its Chairman, Ben Bernanke, the US Federal Reserve has convinced the world’s three other key central banks – the Bank of England, the ECB, and the Bank of Japan – and many others to adopt its policies of quantitative easing (QE) to spur economic growth. By lowering the cost of borrowing and lessening the rewards of saving, I believe that these policies have led to increases in spending. But to call it a success involves only looking at one side of the balance sheet. The supposed benefits come at a high cost.
Gasoline prices rose by nearly 15 percent from January to February of this year. Spending also rose in grocery stores, which are considered to be a gauge of necessity spending. On the other hand, declines in department store, restaurant, and furniture spending would seem to indicate that consumers are cutting back in areas that economists deem to be “discretionary.”
Four years of annual trillion-dollar-plus government deficits and the Fed’s creation of more than $2 trillion of synthetic money since the crisis beganhave injected almost unimaginable amounts of “stimulus” into the US economy. In addition, the Fed’s downward distortion of the rates of interest, inflation, and unemployment is cynically designed to encourage a false sense of economic growth and economic optimism.
In view of all of this, it is absolutely amazing how listless overall consumer spending has been. I see it as evidence that other forces are holding the lid down on real increases in economic growth.
But investors are loathe to ignore such a wave of buoyancy in official government figures. The result has been an impressive recovery in US equity indices of some 125 percent since the market lows of 2009.
Bernanke has indicated that the Fed will maintain both zero percent interest rates and massive QE into the foreseeable future. We must assume that such moves will continue to create dubiously impressive trends in spending and stocks.
Prudent investors are faced with a scenario where consumers may be persuaded to extend their purchasing of necessities and replacements to more discretionary items. If that happens, it could provide welcome short-term growth to the US and other economies in the world. Also, it may justify selective investment in domestic equities, particularly necessary commodities.
However, beneath the false enthusiasm of the markets will lurk threats to the US dollar, and of a potentially dramatic rise in US interest rates. These dangers demand extreme caution, especially in light of recent double-digit percentage rises in the stock market.
John Browne is a Senior Economic Consultant to Euro Pacific Capital. Opinions expressed are those of the writer, and may or may not reflect those held by Euro Pacific Capital, or its CEO, Peter Schiff.
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The gold naysayers are still out there in droves, other than Lady Gaga who is ensconced after surgery in a custom-designed, 24-carat gold plated wheel chair.
There is no denying that gold is off to its worst yearly start in a quarter century and that just in February investors sold 106 metric tons of gold from gold ETFs. (Even so, this is just a small portion of the fund’s holding and gold has gone up since then, a bullish sign) The newspapers headlines are full of eulogies for the gold bull market saying it’s finished, washed up, over.
This sort of stuff gets us, contrarians, excited. The best time to buy into the gold market is when investors are at their most bearish.
Still, legendary investor George Soros reduced his stake in a gold ETF by 55 percent in the last quarter, but we don’t know if he has piled back in or not. Soros Fund Management LLC owned about $97 million of the yellow metal through the SPDR Gold Trust as of Dec. 31, according to regulatory filing. John Paulson, the largest SPDR investor, kept his gold holding valued at around $3.4 billion, unchanged last quarter, his filing showed.
Gold has underperformed so far this year. That is the unsavory truth. (We note that gold didn’t decline for all investors. Gold priced in yen rose this year and the same was the case in terms of the British pound.
With global stock markets at a four-year high and the dollar near its strongest in seven months, eight of 13 analysts surveyed by Bloomberg said they expect gold prices will be lower in 2014 than this year. The median estimate of the 13 analysts is for a record annual average of $1,700 in 2013, falling to $1,638 in 2014.
There seems to be a general sentiment that the world economy is improving. Many are speculating that the Fed is going to stop printing money after 2013 (through QE that is).
That’s nice. But things are not always what they seem. We don’t see reasons for this enthusiasm about economy recovery just yet. We don’t see an end to quantitative easing. The Fed is increasing its already large $3 trillion holdings of Treasury and mortgage securities by $85 billion a month. Bernanke has made it clear in his most recent testimony before Congress last month that he will not make any changes until unemployment rates fall to 6.5% or lower. He plans to hold short-term interest rates near zero and has no plans to increase rates.
The truth is that fundamentals since gold reached its apex a year and a half ago have not changed. Central banks around the world are accumulating more gold, and announcing much more quantitative easing than even before.
With fundamentals unchanged, let’s see how technical situation looks like for the yellow metal – we’ll start with its long-term chart (charts courtesy of http://stockcharts.com. (Click HERE or on the Chart for Larger View)
In this chart, we see that in addition to reemphasizing that the “extremely oversold RSI readings on the gold market that the RSI suggests that the situation is as extreme as 2008, we must also discuss the 300-day moving average signals for gold”moving average. While a move below this level is not bullish for gold on its own, recall that in 2008, gold moved below this level twice and the second time marked the final bottom.
We are now in this situation once again. This is the second time gold is visibly below this important moving average. This consolidation period was longer, but it still is the second move below the average and in 2008, a rally was subsequently seen.
Other than adding this observation virtually nothing changed on the above chart since we previously commented on (Gold Price in March 2013) and we continue to have a bullish outlook as gold is above the declining medium-term support line and 2012 lows.
We have already mentioned that even though the yellow metal’s performance seems relatively poor this year, it is not so in currencies other than the USD. Japanese Yen seems to be the best example hence we’ll turn to gold priced in this currency now.
In this chart we see a clear breakout and a verification of the breakout above the 2011 high. With this breakout just being verified, the outlook is clearly bullish at this time.
On a side note, we would not be surprised if some websites provided this chart as an example when defining what a breakout or verification are – it’s that clear.
Let’s have a look at the yellow metal from the euro perspective now.
Here, we see a small breakout above the declining resistance line. On Friday, when the above chart was made available to our subscribers, we wrote that if [the breakout was] confirmed, the outlook would be very bullish for the weeks ahead – and we expect to see this confirmation shortly.
We now see that this was indeed the case and the technical picture has improved.
Summing up, we continue to have a bullish outlook for the yellow metal. The yellow metal remains above key support lines from both the USD and non-USD perspectives. We also saw a breakout for gold priced in euro this week, and it seems that the final bottom for recent declines may already be in for the precious metals. In case of the speculative capital, having a stop-loss order “just in case”, is still suggested, though.
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Thank you for reading. Have a great and profitable week!
Przemyslaw Radomski, CFA
Founder, Editor-in-chief – Gold Investment & Silver Investment Website – SunshineProfits.com
David McALvany : With over 40 central banks setting rates at or near zero percent, there is the potential for problems to arise in almost every part of the globe, and perhaps this fits the earlier question: Where would you see opportunities, where would you see risks, and should we have any concerns lingering in terms of the old inflation versus deflation debate?Marc Faber : It all depends how you define inflation. Normally, some people think, like the Fed Chairman, that if consumer prices go up, that is inflation. He doesn’t look at rising stock prices, rising art prices, rising real estate prices, rising collectables pricing, or rising commodity prices, as a symptom of inflation. But these are symptoms of inflation. They arise usually because of too much money printing.
I look at it this way. Every inflation eventually comes to an end, and is followed by deflation. I just don’t know when the deflation in stock prices will happen. To some extent, it already happened in the gold market. To some extent it already happened in the real estate market. It hasn’t happened yet in stock prices, but that is likely to happen as well sometime in the future. And when it happens, I think the consequences for the real economy will be negative.-
You Don’t create Wealth in a Nation by boosting Asset Prices. You create Wealth through Employment and Capital Investment
Marc Faber : So if you want to boost equity prices, or asset prices, print that much money. But as I just tried to explain, you don’t create wealth in a nation by boosting asset prices. You create wealth through employment and capital investment in factories, in infrastructure, in education, and in research and development.
Marc Faber : you cannot create Real Wealth by Printing Money
Marc Faber : First of all, as an economist, I have to say that you cannot create real wealth by printing money. You can create illusionary wealth, in other words, asset prices go up, but the wealth of a nation comes from work, not from speculative gain, and it comes from productivity, innovation, and capital spending. It doesn’t come from consumption. Essentially, what we have done in the Western World is to increase demand through consumer debt over the last 20 years, and now through government debt, and both are very dangerous developments because they take demand from the future and [expend it] today. But both are not sustainable in the very long run.
“People will be hurt over this decision; some shall be killed.”
Dennis Gartman focused on what he referred to as a “Theft” of depositors money in Cyprus:
“There is no question but upon whom the decision by the Cypriot government noted at length above is going to fall most heavily: Russian oligarchs; Russian government officials and Russian criminals.”
“Cyprus has been their own private Switzerland for many years. Legal and non-legal Russian cash has swamped the banking system in Cyprus since the early 90’s. The beauty of the island; the ease of admission too and exit from the island via boat or plane; the secrecy of the banking laws; the warm Mediterranean climate and the ease of which Cypriot authorities could be bribed and bought all worked to make Cyprus the center of Russian capital flight.”
…..
“The Russians… legal and illegal… loved Cyprus for the reasons noted above, not the least of which was the tiny 4% corporate tax rate there. Who would not like that rate? It attracted money relentlessly, with the Russians leading the way. Criminal money especially was attracted to the secrecy laws, sending money to the island to have it “washed” and then either left there on deposit, or returned to other banking centers for “investment” abroad, but “washed” thoroughly and made nearly impossible to be followed and tracked. It was an enterprise that worked to the benefit of the Cypriot government and to the Russians, despite the comment by the new President, Mr. Anastasiades, that Cyprus was and is “not complacent about money laundering.”
…..
“One could only laugh as such a comment; of course Cyprus was complacent about laundering. To think otherwise was and is naïve. Ah, but now you’ve stolen Russia money… or soon shall depending upon the vote in the Cypriot parliament… and that is dangerous… very. One does not steal Russian mafia money and get away with it. There are fewer statements of fact that are more certain, more factual, more unyielding than this statement. Russian Mafia figures do not take well to being stolen from, and they take even less well to be made fools of. We see no reason to mince words at this point: People will be hurt over this decision; some shall be killed.”
About Dennis Gartman & The Gartman Letter
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