Cindy Yeap / The Edge Malaysia discusses “What does the new frontier of negative interest rates in the global arena mean for investors?”
“For RHB Research Institute executive chairman and chief economist Lim Chee Sing, NIRP “can only be seen as a temporary expedient to hold up financial markets”, albeit one that has little room to push for more economic growth in this relatively mature stage of the growth cycle.
“That means rising investment premiums and heightened market volatility will likely be the order of the day in the days ahead. Portfolio investors may have no choice but to build some degree of defensiveness into their portfolios to balance out the risks. This implies rising appetite for high-yield stocks,” Lim says.
“Even dividend stocks have caveats in the days ahead, largely due to their rich valuations vis-à-vis tougher conditions to grow at the same rate as before. For example, sin stocks might have to contend with higher taxes; the fees for telecommunications spectrum refarming have yet to be revealed; and consumer stocks have to contend with the possibility of a further tightening of consumer spending. Then, there is the higher labour cost.
“The focus should be on stocks with an improved business model, reasonable earnings visibility, strong cash flow, a dividend policy and, thus, sustainable dividend payments. Of course, one cannot ignore valuations but rich valuation stocks are still susceptible to a selldown should the global economy take a turn for the worse,” Lim adds.
“Gerald Ambrose, CEO of Aberdeen Islamic Asset Management Sdn Bhd, too, noted expensive valuations after a good run in recent years.
“We are keeping a close eye on notable high-yield companies, like the cellular phone companies, the brewers, tobacco companies and the REITs (real estate investment trusts). We’re currently about halfway though the 4Q2015 results season and to be honest, a lot of the better-managed companies have been able to find efficiencies to enable dividend payout to remain high. However, after outperforming for over a year, a lot of the high dividend yield companies are hardly cheap,” he says.”
BOTTOM LINE: Focus your strategy on yield and gold. Gold is an alternative when interest rates are negative adjusted for taxes and inflation.
I came across this piece from Quandl and it got me thinking about about politics and experts and analysts. Quandl is a data site that offers information on thousands of stocks, with historical data going back decades and futures data to help you forecast trends. They created this graphic to help novice analysts get ahead in the industry.
I love to talk politics. My dad and I conversed and analysed and argued about the Vietnam War and every other thing that was worth discussing. Sometimes they were heated. College was a disappointment. I thought there were would be more conversations in depth much like the ones between dad and me. Sadly, that only occurred in the classroom … infrequently. In my adult life, once in a while there is a conversation I look back on with fondness. Those conversations with new friends or in depth conversations over a fine dinner. Today, it is hard to have conversations when each participant is holding on to biases and attaching their ego to those opinions.
I want to have conversations with great analysts.
When I was a broker, I made the most money for my clients when I could analyse the facts, and draw conclusions from those facts that were outside the norm. If you saw The Big Short you saw great analysts reach conclusions that were farseeing. The consequences of their conclusions were far reaching.made them huge piles of money.
It is one thing to develop a story about the future of Germany or Cuba if you are a citizen, another thing altogether to draw the conclusion that being Jewish in Germany is existential; it is another thing to be Cuban and realize that the door to Spain is the only escape and it will close soon.
To stand in a place and observe that a country that spends more than it takes in and builds up debt to the point that they can barely pay the interest is a good analyst. To be a great analyst it takes courage to conclude that this cannot stand and it’s time to leave.
Great analysts tell stories that are believable and motivate others to take action. Strive to become a great analyst.
By Clint Siegner, Money Metals Exchange
Looking Ahead to 2016
Forecasting today’s volatile, high-frequency machine driven and manipulated futures markets using fundamental analysis is futile, as a great many precious metals bulls will attest. To complicate matters, an obsession with Fed policy dominates all markets. Officials at the Federal Reserve are often less than forthcoming and are just as bumbling as the Soviet bureaucrats when it comes to centrally planning our economy.
Nevertheless, beneath all of the artificial influences and all of the leveraged paper, the gears of the physical market for gold and silver still turn. We can be sure prices will reflect actual supply and demand for physical metals at some point, even if we do not know when. With that in mind, here is a look ahead to 2016…
Silver production peaked in 2014, while gold production is expected to peak in 2015. Falling prices make an increasing number of mining projects uneconomic. Lower fuel costs are helping, but the average all-in cost of production for silver is estimated at around $17/oz and for gold at around $1,150/oz.
Today precious metals sell for well below than their all-in production cost. Primary producers of gold and silver will deliver less to market in 2016 given that a great many miners currently take a loss on every ounce they sell.
But there is another factor likely to decimate supply in 2016. Base metal prices, including for copper, fell dramatically this year, and the outlook is not too bright for the year ahead. The Chinese economy, the world’s largest market for commodities, is slowing. Brazil is in real trouble and economists are worrying more about the possibility of recession around the world.
Slumping demand for base metals will impact supply of gold and silver because huge quantities of these precious metals are produced as a byproduct of mining for base metals such as copper and zinc. The reorganization of Anglo-American PLC, one of the world’s largest mining conglomerates, earlier this month highlights just how difficult the current environment is for producers – regardless of which metal they are mining.
Gold and silver prices have been in decline since 2011, but it is only during the past year that average prices will finish well below even the most conservative estimates of production costs. The recent carnage in base metals will add significantly to constraints on precious metals supply in the months ahead.
Physical Demand Rising
Investment demand for physical bullion is perhaps the biggest story in precious metals for 2015. Mints and refiners spent much of the 2nd half of the year unable to keep up. Investors had to contend with higher premiums and delivery delays, finally getting some relief now as the year draws to a close.
Only time will tell if 2016 can top this year’s record. We look set to enter the New Year in much the same way we entered 2015 – with steady, but far from overwhelming buying activity for fabricated coins, rounds, and bars. Investors loaded up in recent months and now await the next catalyst.
It may be price action. Lower spot prices over the past 4 years have been a big driver of demand. And prices moving consistently higher will also inspire demand from newcomers (as we saw during the last bull cycle between 2009 – 2011). Only flat or range-bound prices typically lead to investor apathy.
As always, geopolitical events will play a big part in whether or not metals benefit from safe-have buying. In 2016, investors will be watching the ongoing saga surrounding Greece and other hopelessly indebted European nations. The U.S. is at odds with Russia in the Middle East and in Ukraine.
And recent tremors in high-yield debt markets may be advance warning that extraordinary leverage is about to rock financial markets once again. These stories, and others no one can predict, have potential to generate a flight to safety in the coming year.
Industrial demand for gold and silver may turn out to be tepid for 2016. This is less of a factor in gold markets than for silver, where manufacturers consume a good portion of what is produced annually. As mentioned above, some economists worry about the possibility of recession in the coming year. Any slump will weigh on demand for items such as jewelry and other goods. However, a lot of industrial demand comes from high-growth sectors which have proven resilient during past recessions. Electronic, solar, and healthcare related applications for silver come to mind.
Some 2016 Wildcards
Delivery defaults are possible in the futures markets. The explosion of leverage in COMEX gold futures bears watching in 2016. The number of registered bars available for delivery in exchange vaults relative to the number of paper ounces being traded shrunk dramatically to record lows in recent weeks. It’s a trend that simply cannot go on very much longer – not at the current pace of decline.
Exchange participants may convert more gold stocks from “eligible” to the “registered” category. That’s possible, though there is good reason to wonder how much physical metal the holders want to part with at current prices. The precipitous drop in registered stocks may well be signaling they are more than a little reluctant to part with it.
If holders of silver and gold futures contracts start standing for actual delivery of more metal than the COMEX has available to deliver, or should traders even begin to seriously entertain that possibility, we’ll see some fireworks.
Leading Republican candidates are making noises about sound money. Donald Trump, Ted Cruz, Rand Paul, and Ben Carson all have questioned the wisdom of Fed policy. Republicans everywhere are critical of federal debt and deficits and have been for decades now. Given the Party’s atrocious record of turning the talk into actual policy, we should remain skeptical that any elected Republican leader will actually achieve reform.
But there can be no doubt that the sound money issue is gaining traction. We can’t rule out someone in the crowded field of candidates tapping into the popular outrage over out-of-control borrowing and spending. Should ideas like reinstituting gold backing for the dollar gain serious momentum in the campaign, the metals markets could perk up.
Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.
Following the recession of 2008, investors have found a better way to protect their investment by pouring their hard earned money into precious metals. Here, we’ll be discussing the Top 5 Precious Metals to Invest In worldwide.
Over the last decade, we’ve witnessed a descending trend in gold prices. However, the fact that gold outlays better than other types of investment is because of its trustworthiness, as it is not as prone to fluctuating prices. The factors that are responsible for its prices are the US dollar value, supply and demand, and interest rates.
The most common uses of gold are for investment, electronics, dental treatments, and the obvious one, jewelry.
Investing in silver is a reliable way of making sure that you have a stable capital investment. It’s a much better way of preserving assets regardless of the position the financial system is in and it is particularly well suited for holding in tough economic times.
This passing year, 54% of the total silver demand was for industrial uses, which ranged from automobile industries to electronics. Another factor that affected demand for silver was the solar explosion in Japan. China was reported to have imported most of the world’s silver last year, about 1,154 tons.
The most common uses for silver are electronic devices, water filtration, Silver Oxide Batteries, piping, and solar panels.
Platinum is one of the world’s scarcest metals. Platinum provisions are concentrated to the region of South Africa, which results in about 80% of the total provisions. Meanwhile, Russia has about 11%, and North America has about 6%. This metal holds high significance as a manufacturing material; its prices are however, fairly unpredictable due to limited suppliers. For this very reason, investors find it an attention grabbing investment.
The value of platinum is about twice of that of gold, which fluctuates according to the supply and demand. In harsh economic times, the value decreases due to fall in demand, and has been known to decline even below the price of gold. To give you a fair idea, the high and low of platinum prices for the year 2014 were $1,178 and $1,520.
Palladium is a metal that is in the same group as platinum. In addition to the supply and demand factors it shares with platinum, palladium is affected by the following three factors; the crises in Ukraine, vigorous venture demand, and the vehicle industry. 40% of the palladium is mined in South Africa, while Russia produces about 44%, and the rest is produced by Canada and US based mines.
Up until a couple of years ago, rhodium was the most posh metal around, with the price of an ounce touching $10,000. Not only is it a 100 times rarer than gold, but apart from that, it is imperative for use in the automotive industry, as its application as a catalytic converter is unparalleled.
Nevertheless, the trio of platinum, palladium, and silver are the most in demand in the current times, with the demand being driven by industrial needs rather than being used as a safety investment. Continued manufacturing in industries will also only improve their appeal in the upcoming years.
After an incredible June, Mover Mike hit 2,000,000 page views. I have been blogging since 2004 and it is nice to see that more people are finding this blog. Sometimes, I have considered quitting, thinking why bother, no one reads me. However, conservative fiscally, Libertarian socially, this blog joins many others who don’t like the path the U.S. is on.
No longer can we discuss things rationally and heatedly. Now it seems the play book says to ignore the message, savage the messenger. We are seeing that currently with Trump and we read that Hillary hasn’t answered the press questions in two weeks. AND…more and more people are considering leaving the country.
Mexico”sends” their unemployed to the U.S.. How long will 93,000,000 unemployed and under employed wait to move south? How long will the drought stricken in the south west wait to move? What happens when the U.S. becomes like Greece and can’t feed the 43,000,000 on EBT?
Stay tuned, dear reader. I hope to cover it and provide some answers. Thanks for reading Mover Mike
File this “Closing the Gap” graph under why you own gold. Why is that? Well notice how our defict reduction has pretty much been related to increasing revenues – spending hasnt fallen at all. If stock markets start to fall, then revenues will fall and the budget gap will increase again – we havent done anything structurally about government spending in any way, shape, or form.
To say that gold is in a bear market is to misunderstand both gold and markets. Gold isn’t an investment that goes up and down. It is money in the most basic store-of-value sense. Most of the time it just sits there, and when its price changes in local currency terms that says more about the local currency than about gold.
But when currencies collapse, gold shines.
Consider the above from the point of view of a typical Russian. The ruble is tanking (no need to understand why — all fiat currencies go this way eventually and the proximate cause is almost irrelevant). Russians who trusted their government and kept their savings in, say, a bank account, are losing their shirts. But those who own boring, doesn’t-pay-interest, in-a-bear-market gold have seen their capital appreciate in local currency terms by about 60 percent in just the past month. They’re not “making money,” but they are preserving wealth.
This is how it has gone always and everywhere when governments have destroyed their currencies. In the Roman Empire, revolutionary France, revolutionary America, most of Latin America in the 20th century, and now big parts of the developing world, local currencies evaporate but gold just sits there, buying the same amount of stuff as ever, impervious to the games governments play.
It won’t be long before this chart is replicated in a whole lot of other places. But by then it will be too late to prepare. The gold will be gone and those who trusted their governments will have to make do with promises.
It all started with an innocent email from someone I follow on Linkedin suggesting I take a look at a gold widget. It said, “Please find below our gold spot price widgets. Updated every minute and available in 119 currencies, they will allow your visitors to precisely monitor the evolution of the gold price.” What followed was an interactive gold chart going back 10 years. The chart shows strong support at $1,200
I then went to Market Club to see latest pricing of gold. Hmmm $1222! I noticed that Silver was $17.75. The ratio between gold and silver ranges from 15 to 85. Quickly dividing $1222 by $17.75 yielded 68.81. I Googled gold/silver ratio and found Gold Silver website showing the ratio in various time periods:
Gold Silver Ratio History Charts
30 Day gold silver ratio 5 Year gold silver ratio
60 Day gold silver ratio 10 Year gold silver ratio
6 Month gold silver ratio 20 Year gold silver ratio
1 Year gold silver ratio 36 Year gold silver ratio
2 Year gold silver ratio
While the ratio is very high right now, it is still shy of 85, but it sure looks like something to watch closely. Suppose you are bullish on gold and think price could go to $2,000 per ounce. From this price that is a 64% increase. If the ratio stays the same between gold and silver at 68.81, silver would sell at $29. What if the ratio declines to qa more reasonable level. based on the charts a more reasonable level would be 45. If gold went to $2,000 45 times the price of silver, silver would sell at $44.44, a 150% increase.
That is exciting to me!
“The Air Force said it has begun looking for alternatives to the RD-180 rocket engines for its Evolved Expendable Launch Vehicle program — the fourth largest line item in the U.S. defense budget — now that Russia has threatened to cut off the technology in its tit-for-tat struggle with the U.S.
“Lawmakers and national security analysts said they were aghast that the military allowed itself to become so dependent on Russian military technology during an era of uneasy relations.
“What were we thinking? It’s clear now that relying on Russia for rocket engines was a policy based on hope, not good judgment,” said Michael V. Hayden, a four-star Air Force general who headed the National Security Agency and the Central Intelligence Agency before his retirement in 2009.”
Rocket Engines are not our only vulnerability. Our semiconductors are made overseas and rare earths primarily come from China.
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