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Gold & Precious Metals

Equities Will Catch Up to Higher Gold Price: Matt Badiali


Posted by Brian Sylvester of The Gold Report

on Wednesday, 25 April 2012 18:49

Brian Sylvester of The Gold Report 

Matthew Badiali Ongoing inflation pressures and China's investments in the African gold supply chain point to a higher gold price, according to Matt Badiali of Stansberry & Associates. Bullion in all its forms belongs in every portfolio and when it comes to equities, investors have their choice of business models—dividend payers, prospect generators and royalty companies. In this exclusive Gold Report interview, Badiali outlines companies whose equities should catch up to the higher gold price.

Companies Mentioned: ATAC Resources Ltd. - Barrick Gold Corp. - Endeavour Silver Corp. - Franco-Nevada Corp. - Keegan Resources Inc. - MAG Silver Corp. - Newmont Mining Corp. - Pretium Resources Inc. - Riverside Resources Inc. - Royal Gold Inc. - Seabridge Gold Inc. - Silver Wheaton Corp.

The Gold Report: Matt, in the February 2012 edition of Stansberry's Investment Advisory, Porter Stansberry predicted gold would hit $9,600 an ounce (oz) someday. How should investors protect themselves from this coming crisis?

Matt Badiali: In general, I agree with Porter's thesis. Bullion—gold, silver coins or bars—should be part of everyone's portfolio. It is one of the best anchors against inflation. Gold and gold stocks also are important holdings because as the value of paper money falls, the value of gold rises.

TGR: Stock prices have not gone up as much as the gold price. Will that trend continue?

MB: We have been in an odd scenario. If gold miners were T-shirt makers and the price of T-shirts went up, the market would buy the company to match the earnings. That has not happened for gold stocks.

Last year, the Market Vectors Gold Miners ETF (GDX:NYSE.A) was down 25% while the price of gold was up 15%. Looking at just the last three years, stocks were up 40% while the gold price rose 90%. So, in the short term, the Gold Miners ETF has underperformed gold.

Gold miners' earnings have climbed dramatically, but their share prices have not followed suit. I believe gold miners will outperform the metal just because they have to rebalance.

TGR: What does the volatility in gold tell us?

MB: Generally speaking, the market wants a stable U.S. dollar. It rallies to dollars for all sorts of reasons. I think that is false faith.

So many new dollars have been printed that the value of all tangible things has to increase in response. For example, we all think $110/barrel oil is crazy expensive. But, relative to gold, oil has been less expensive over the last couple of years. The price of oil is falling in terms of real money, but going up in terms of dollars. That is a good indicator of how much new paper money has been printed.

TGR: What effect would higher interest rates have on junior miners? Can the increase in the gold price offset the greater cost of raising capital?

To Read More CLICK HERE

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Currency

So Long, US Dollar


Posted by Marin Katusa

on Wednesday, 25 April 2012 18:37

By: Marin Katusa
There's a major shift under way, one the US mainstream media has left largely untouched even though it will send the United States into an economic maelstrom and dramatically reduce the country's importance in the world: the demise of the US dollar as the world's reserve currency.

For decades the US dollar has been absolutely dominant in international trade, especially in the oil markets. This role has created immense demand for US dollars, and that international demand constitutes a huge part of the dollar's valuation. Not only did the global-currency role add massive value to the dollar, it also created an almost endless pool of demand for US Treasuries as countries around the world sought to maintain stores of petrodollars. The availability of all this credit, denominated in a dollar supported by nothing less than the entirety of global trade, enabled the American federal government to borrow without limit and spend with abandon.

The dominance of the dollar gave the United States incredible power and influence around the world… but the times they are a-changing. As the world's emerging economies gain ever more prominence, the US is losing hold of its position as the world's superpower. Many on the long list of nations that dislike America are pondering ways to reduce American influence in their affairs. Ditching the dollar is a very good start.

In fact, they are doing more than pondering. Over the past few years China and other emerging powers such as Russia have been quietly making agreements to move away from the US dollar in international trade. Several major oil-producing nations have begun selling oil in currencies other than the dollar, and both the United Nations and the International Monetary Fund (IMF) have issued reports arguing for the need to create a new global reserve currency independent of the dollar.

The supremacy of the dollar is not nearly as solid as most Americans believe it to be. More generally, the United States is not the global superpower it once was. These trends are very much connected, as demonstrated by the world's response to US sanctions against Iran.

US allies, including much of Europe and parts of Asia, fell into line quickly, reducing imports of Iranian oil. But a good number of Iran's clients do not feel the need to toe America's party line, and Iran certainly doesn't feel any need to take orders from the US. Some countries have objected to America's sanctions on Iran vocally, adamantly refusing to be ordered around. Others are being more discreet, choosing instead to simply trade with Iran through avenues that get around the sanctions.

It's ironic. The United States fashioned its Iranian sanctions assuming that oil trades occur in US dollars. That assumption – an echo of the more general assumption that the US dollar will continue to dominate international trade – has given countries unfriendly to the US a great reason to continue their moves away from the dollar: if they don't trade in dollars, America's dollar-centric policies carry no weight! It's a classic backfire: sanctions intended in part to illustrate the US's continued world supremacy are in fact encouraging countries disillusioned with that very notion to continue their moves away from the US currency, a slow but steady trend that will eat away at its economic power until there is little left.

Let's delve into both situations – the demise of the dollar's dominance and the Iranian sanction shortcuts – in more detail.

To Read More CLICK HERE

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Personal Finance

On the Social Security 2012 Report to Congress


Posted by Bruce Krasting

on Wednesday, 25 April 2012 08:16

The Social Security Trust Fund (SSTF) 2012 report to Congress is now out (link). It’s 242 pages and contains a great deal of information. I have reviewed a number of sections in the report that I consider to be key measures of SS’s health. Not one of those variables showed any improvement. Some highlights:

-The Net Present Value of the unfunded liabilities at SS is now a staggering $20.5 Trillion.  One year ago this was $17.9T ($2.6T increase - 15% YoY). This yardstick grew at more than double the rate of the entire national debt 12/31/10 = $14T, 12/31/11 = $15.2T, total increase = $1.2T).

This deterioration is staring policy makers in the face. The burden that SS will put on future generations is growing exponentially.

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-The “Drop Dead Date” where the SSTF is exhausted has been moved up three years to 2033. This is a number that the MSM will focus on. It is a bogus deadline. The SSTF must maintain at least one year’s worth of benefits. The year that TF assets will equal one year of payments will be ~2026. This means that anyone who is age 53 today can expect to get 75% of the value that a baby boomer will get. (Under current law, when the TF is exhausted, benefit payments must be cut.)

Fourteen years is not a very long time for people to plan and adjust for what's coming. The Politicians will have to address this reality sooner versus later. It is already passed the time where it is unfair to those who will be affected.

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-The Drop Dead Date for the Disability Fund has been changed from 2017 to 2016. This is important as the TF has confirmed that the next President will HAVE to bailout one component of SS. It is crucial to ask the candidates what they will do if elected. They better have an answer. When the debate on the future of Disability Insurance (DI) gets going, it will be marked with a sharp divide of opinions. It could easily be a factor in the election.

To Read More CLICK HERE

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Stocks & Equities

It is passed time for a MAJOR disappointment!


Posted by Jack Crooks

on Wednesday, 25 April 2012 08:06

Jack Crooks

 “I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said.”

- Alan Greenspan

Are there no limits whatsoever to monetary policy?  It is beyond pathetic that a rising stock market seems the only substitute for real policy from our “best and brightest.”  Why doesn’t it matter to them that it isn’t working?  Are they that intellectually bankrupt and corrupt?  Is it odd that very smart people outside the government continue to bet on QE 3,4,5,6…?  Or is it the only bet?  What in the world is going on here?   

Orders for U.S. durable goods fell in March by the most in three years, indicating manufacturing will contribute less to growth this year.  

Bookings for goods meant to last at least three years dropped 4.2 percent, the biggest decrease since January 2009, after a revised 1.9 percent gain the prior month, data from the Commerce Department showed today in Washington. Economists forecast a 1.7 percent decline, according to the median estimate in a Bloomberg News survey.  

Now, would throwing more money into the banking system “help” this problem of slowing US growth momentum? 

To Read More CLICK HERE

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Energy & Commodities

Five Tips for Natural Gas Investors


Posted by Marin Katusa

on Tuesday, 24 April 2012 13:07

By Marin Katusa, Chief Energy Investment Strategist

I recently gave an interview on Business News Network (BNN) about natural gas. BNN is Canada's largest news channel dedicated exclusively to business and financial news, so all kinds of market players rely on BNN to provide them with comprehensive coverage of global market activity from a Canadian perspective. Like similar news channels in the US, BNN intersperses real-time news coverage with economic forecasting and analysis, company profiles, and tips for personal finance.

I have been interviewed on BNN numerous times over the last five years, quizzed on the impacts of fracking, the forecast for uranium following Fukushima, the potential of new frontier oil regions, and the future for coal. This time, the topic was "Five Tips for Natural Gas Investors." You can watch the interview if you want; I highly recommend it – the education is worth the time.

On-air interviews are usually pretty speedy affairs, so my BNN interview didn't give me enough time to discuss each point in depth. The Dispatch gives me that opportunity, so here are my five tips for natural gas investors in a bit more detail.

1.  Watch for Looming Reserve Writedowns

A resource estimate is a geologic best guess of how much of a commodity exists within a particular deposit, be it ounces of gold, barrels of oil, or cubic feet of natural gas. A geologist gleans information about the deposit's size and grade from drilling results and then creates a statistical model of the deposit. From that model he or she can estimate the commodity count.

However, the amount in the ground is not the amount that can be produced. That's where the reserve estimate comes in. Reserves are an estimate of the amount of a commodity within a deposit that can be extracted economically, which means reserves are a whittled-down subset of total resources. That whittling down process has two steps. First, geologic and technologic factors determine a resource's recovery rate, reducing the resource to the parts that are "technically recoverable." Then, economic considerations further reduce the resource to only the bits that are "economically recoverable."

With natural gas, the advent of horizontal drilling and multi-stage fracturing altered the first parameter dramatically, ballooning North America's technically recoverable gas resources to many times their earlier volume. And while gas prices held, reserves counts ballooned too.

The key bit there was "while gas prices held" – that honeymoon is over. Natural gas prices in North America have declined roughly 35% this year and are down approximately 60% over the last 12 months. Compared to the unsustainable highs reached prior to the recession, gas prices have fallen more than 80%.

To Read More CLICK HERE

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