Gold & Precious Metals

Peter Grandich joined us today for a look at the precious metals markets and recent prices. He’s cautiously optimistic about current trends and believes that $1640 per ounce is a crucial resistance point. I’ve been optimistic myself lately, but as you know I never make short term predictions. First, they’re irrelevant, unless you bought yesterday. And second, buying gold and silver is not a short term play. When you invest in precious metals, it should be to preserve your purchasing power and to ensure your lasting wealth against the currency debauchers who are currently running the world economic system and central banks. As Peter says, this boxer has been written off by the mainstream financial press, but he’s still got a few good rounds ahead of him, and Lord knows, I wouldn’t want to be in the ring facing off against him.

….click HERE to listen to Peter’s interesting interview

3 Ways To Invest in the Oil Sands

Posted by Michel Massad Oil & Gas Investment Bulletin

on Tuesday, 26 June 2012 16:44

Energy stocks across the board have been hit hard in the last quarter—both producers and service companies.  Stock charts have been laid to waste. Neither sexy resource plays nor respected leadership were enough to stem the bleeding.

But shareholders of three energy services companies—Gibsons Energy (GEI-TSX), Black Diamond Group (BDI-TSX) and Horizon North Logisitics (HNL-TSX)—are laughing all the way to the bank, as their stock charts are at or near all-time highs. (See OGIB story on Black Diamondhere.)

And strangely enough, they are all oilsands related.  I say strangely because analysts have not been kind to the producers, warning investors that lower Canadian heavy oil prices could stay for a couple years, impacting profitability.  And there is no close resolution on increased pipeline capacity to handle any increased oilsands production.

On the services side, Canadian securities firms like National Bank and Raymond James have been telling their clients to sell oilfield services stocks for weeks.

The first 2 oilfield services companies are Black Diamond Group (TSX-BDI) and Horizon North Logistics (TSX-HNL), which derive a substantial percentage of their revenue from business related to Alberta’s oilsands.

They provide a turnkey-style Camps and Catering service offering, including manufacturing, transportation and installation, servicing, as well as catering. These companies basically make money from renting beds to oilsands workers, including charging them for management and catering. The work camps are equivalent to small villages with a population exceeding 3,000 souls in some instances.

black-diamond-group 2

….read more and view two more charts HERE

Only three days for EU to avert financial disaster warns George Soros

Posted by George Soros

on Tuesday, 26 June 2012 15:41

Hedge fund supremo George Soros is warning the European Union summit this week that it only has three days to avoid a fiasco that would plunge the world into a new economic crisis.

It is clear that financial markets need the start of a solid plan for a European banking union and euro bonds or else the risk is that markets take fright and sell-off big time…

 

Picture 1

….click on image or go HERE to view interview with George Soros

Donald Coxe: “The Euro is Bound to Fail” & What you Should Do About it

Posted by Donald Coxe: BMO Financial

on Tuesday, 26 June 2012 14:34

3689757-abstract-vector-illustration-of-a-gold-euro-symbol-crashed-into-the-floor

Hey I am glad you are with us, I am excited about this, every once in a while I get lucky and get Don Coxe to agree to come on this show. He is a Canadian investment advisor for BMO Financial out of Chicago but he has a tremendous track record and he is really widely read by institutions around the English Speaking World. Don is the guy who was absolutely accurate in predicting, and it sounds so funny so early in advance after a 20 year bear market in commodities, he said you know what, we are just about to have this magnificent Bull Market in Commodities in 2000-2001. Another thing he also said that anything that China wants to buy he is going to buy first, and that of course is part of that commodity boom. 

Don what I want to know from you is the bull market in commodities ended or are we just seeing a correction in the commodity boom?
Don Coxe: Well we have gone through the easy part of it, which is adjusting to the knew world order in which China, and then others,  Indonesia, then India and then others like Brazil that came into the scene, who weren’t included in the scene I would call the white mans club plus Japan. It seems so long ago that those were the only countries that you needed to talk about economic progress. And where companies, the major corporations were focusing most of there foreign investment and their operations. But the world has been transformed in that time so that the pause that we are having now people are saying this must be the end of the China story which began in 1985 when Deng Xiaoping processes began to work in China and they have not had anything like a recession in all that time. Now you are entitled if you have been going for 27 years with gains of more than 9% a year in that time, you are entitled to have some readjustment and realignment of the economy because you started off as a virtual subsistence economy and are now the 8th wonder of the world in terms of cities, transportation systems, all these things. So we are entitled to have some adjustments here and this comes at a reasonable time because they have a 10 year plan and they are transferring their leadership as of this fall. 
So yes, there was bound to be a slowing there and we collectively in the west have managed to blow away a large portion of the money we have made in the tech bubble, then the real estate bubble, then we discovered our banking system (thank heavens not in Canada) turned out to have vastly bloated balance sheets and had to be bailed out. Despite the things we have done wrong the world has continued to progress. So I can say that the commodity story can hardly be over when the country that has generated the growth is still growing at a rate that is maybe 6 times the rate of the US economy. So it is absurd to say it is over but the consumption patterns are going to change and it is still the most amazing story on earth. 
Don, the big question is will the European Currency survive, will the European Union Survive?
Done Coxe: Well I don’t think the Euro will be around 3 years from now, but I would like the story to end sooner. If you’ve got an extremely medically sick person around who has a severe illness you want to keep them alive as long as possible but if you find out that it was going to cost $100,000 a day for 3 years to keep someone alive from a disease that they are never going to recover from, you might say gee, can the health care system afford this. And we are all part of the health care system for keeping the Euro afloat. I was certainly glad that Prime Minister Harper didn’t want to become to involved in this for which he was denounced by the European Union, but you know he is on the right track if he is being denounced by them for saving their own currency. I don’t think the Euro can make it. Now that is not the majority opinion, and I wish frankly the would get it over with. Go through the adjustment process which will be a wrenching one. I do not see how a currency which puts together a group of competitive northern economies with traditions of hard work and honest public service can work putting together in the same currency a group of economies which are best at having relics of past civilizations, having good tourist attractions and having a dolce vita lifestyle. You just can’t expect to subsidize it forever. These countries should never have been put into the same currency, and it is bound to fail, and the sad thing is it will take a long time to come to a conclusion because they keep being able to get money from other parts of the world. Now I hope the IMF doesn’t give them too much. I am glad Canada isn’t, the US can’t afford to because its struggling, so its going to fail. But its also one of the reasons Gold is at $1,550 instead of $750 which is where it was when the first signs came about that the Euro wasn’t going to make it. 
Don, the question I want to ask you is what should be be doing to protect ourselves in this environment?
Don Coxe: The first thing you do is avoid taking pure financial risk by investing in banks that are hugely tied into Euros. That’s one of the reasons I recommend people stick with Canadian Bank Stocks. What we don’t know is how exposed US banks are but we can remember that one relatively small bank Lehman Brothers in 2008 nearly brought the whole system down. A lot of people think that they are going to be able to protect themselves by having money in bank accounts abroad, but that is just not a safe trade right now thanks the the Euro Currency Crisis. 
The other thing is that China is still doing relatively well and you want to be investing in things that the Chinese and those countries that are following China’s model want to buy. 

Tasting the Medicine of Deleveraging – June 24

Posted by Victor Adair via Union Securities

on Tuesday, 26 June 2012 7:00

I divide my participation in the markets between my short term trading accounts and my long term savings accounts. I use my short term trading accounts to move in and out of the futures and options markets with positions that I may hold for a few days to a few months. I try to earn trading profits with these accounts but I also see this activity as “keeping my hand in” as I try to gauge what is going on day-to-day in the markets (See Charts Section below.)

My objective with my long term savings accounts is capital preservation and for the past couple of years I’ve been very conservative…mostly in cash…as I’m far more interested in hanging onto that money than in trying to earn a couple of extra percentage points by reaching for yield. My short term trading accounts and my long term savings accounts constitute ~95% of my net worth. Over the past couple of years I’ve diversified my currency exposure by swapping ~25% of my net worth into US$ at an average of ~9700 USDCAD.

I’ve also been pretty conservative with my short term trading accounts. I rarely use leverage and the manic-depressive mood swings of the markets have kept me defensive. Over the past few months I’ve realized that I have little ability to handicap the short term European political response to their growing debt crisis…and thus little ability to anticipate the risk-on/risk-off price swings that result from changing perceptions of the European political theater.

My long term view of what is happening in the world makes me comfortable to have my savings largely in cash. I think we’ve had a 30 year credit boom, the greatest in human history, and that produced a great boom in asset prices and a great willingness, by both borrowers and lenders, to finance risk. I think we are now in a major reversal of that 30 year credit boom, and that this reversal will play out over several years as leverage is wrung out of the markets. Assets that boomed the most on debt financing will likely fall the most as leverage is reduced. To quote Gary Shilling, we are in an “Age of Deleveraging” and I anticipate that deleveraging will grind on relentlessly, regardless of the rearguard actions of central banks and governments.

Perhaps one of the most painful consequences of “Way more money has been borrowed than will ever be repaid” is that “Way more promises have been made than will ever be kept.” It seems to me that politicians of all stripes will try to avoid or deny this problem….but the math is overwhelming…some promises are going to be broken…and some people are going to get hurt as a result of that.  

The world economy seems to be falling back into a recession, or worse, as the deleveraging process continues…markets are pricing that in…weak credits have to pay more to borrow money while stronger credits pay less. Commodity prices remain under pressure. Increasing stress on the financial system seem likely to change our world in ways that we haven’t anticipated…and may be poorly prepared to deal with….for instance we will likely see widespread “new arrangements” for pension payouts.

My default position when I look at financial markets is skeptical…I don’t think of myself as a pessimist…but rather as a realist anticipating the inevitable consequences that come after 30 years of irrational exuberance – financed with other people’s money! I expect that one of the key social divides in our not-so-distant future will be “Who is going to pay?” Who is going to have their “entitlements” cut? Who is going to have their “taxes” raised?

Charts Section

(Note: I’m not a trading advisory service. I’m not going to detail my personal trades…but here are a few charts that I find interesting…)

Crude: Short term oversold? Prices are at key support. Decline since Feb. anticipating global economic slowdown / reduced Iran tensions / increasing crude production / and maybe, “substitution” of crude demand with Nat Gas?

CLE-W-June24

Gold: A test coming of key support levels ~ $1525/35? Downtrend from last September highs looks powerful

GC-W-June24

Silver: Right at key support levels…I’d expect a break below $25.

SI-W-June24

Silver/Gold ratio: continues down from Key Turn Date May 2, 2011. Not positive for “risk” trades.

SI-GC-June24

LME Aluminium: Often over-looked relative to copper. But it grinds lower from Key Turn Date May 3, 2011. Hearlding global economic slowdown?

LA-W-june24

US Ten Year Note: Did we finally make a top in a 30 year bull market in bonds? Maybe…but selling powerful up-trends is rarely a profitable strategy!

TY-M-June24

But it is interesting to note on the daily charts that the recent Turn Date of June1/June 4 remains intact and that TNote prices had their lowest close in a month even as the S+P reversed sharply from resistance this past week…

TYA-D-June24

EP-D-June24

Japanese Yen:  the Yen had its lowest close in nearly two months and the recent June 1/ June 4 turn date remains intact. Is the Yen finally starting its long predicted downtrend?

JY-D-June24

VictorCQG

 

vadair@union-securities.com“>vadair@union-securities.com