Massive Wave Of Lawsuits To Be Filed By The US Against America's Biggest Banks As Soon As Tomorrow
In a move that could either send BAC stock limit down overnight or send it soaring (we are still trying to figure out just what is going on here), the NYT has broken major news that the US is preparing to go nuclear on more than a dozen big banks among which Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, in an attempt for Fannie and Freddie to recoup $30 billion if not much more. The lawsuit is expected to hit the docket in the next few days: "The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims." Now, taken at face value, this would mean that Bank of America can kiss its ass goodbye as unlike the Walnut Place litigation, this will take place in Federal Court where Article 77 is not applicable. Yet there is something that gives us pause: namely logic, captured by the following words: "While I believe that F.H.F.A. is acting responsibly in its role as conservator, I am afraid that we risk pushing these guys off of a cliff and we’re going to have to bail out the banks again,” said Tim Rood, who worked at Fannie Mae until 2006 and is now a partner at the Collingwood Group, which advises banks and servicers on housing-related issues." In other words: if the banks are sued, and if justice prevails, the end of the world is nigh and cue TARP 2 - XXX. Now where have we heard that argument over, and over, and over before.Wikileaks Releases Entire 65 Gigabyte Uncensored Cablegate Archive (With Or Without Bank Of America Disclosure)
Looks like Wikileaks is not waiting to see how litigation with the Guardian turns out and is set on doing all it can to bring the world to the brink of, what's that word again, oh yes, war. And a free Zero Hedge hat to the first guy to discover whatever it is that Wiki may or may not have had on Bank of America. Something tells us not many people will be sleeping at the Department of State tonight.Goodbye High Frequency Trading - Regulators Seek Secret HFT Codes
The crusade against High Frequency Trading which Zero Hedge started well over two years ago, is now coming to an end. Reuters reports that U.S. securities regulators have "taken the unprecedented step of asking high-frequency trading firms to hand over the details of their trading strategies, and in some cases, their secret computer codes." As everyone knows, the only thing of value within the sub-penny scalping HFT universe are the odd nuances in computer code. Which is why its supreme and undisputed secrecy is sacrosanct. As soon as anyone, especially a regulator, has a whiff of understanding how any given algorithm works, it becomes the equivalent of collapsing the wave function: observing the HFT theft-scalping duality in action eliminates the Schrodinger equation associated with any simplistic algo and collapses its "wave function" to a worthless series of ones and zeros. Said otherwise, this is the end for HFT.
I hope you are Prepared...If not you may well live to regret it...You are running out of time to prepare...
1. Beans...(1 year supply of food for every family member)
2. Bullets...(To protect your food and family)
3. Band-Aids... (supply of required medicine)
4. Bullion...(Physical Silver and Gold) Remember if you can't get to it... and hold it in your hand...You DON'T own it...
If you find useful information, please consider making a small donation, to help cover some of the labor and cost for this blog.
Thank You
I'm PayPal VerifiedCentral bank flight to Federal Reserve safety tops Lehman crisis
A key warning signal of global financial stress has shot above the extreme levels seen at the height of the Lehman crisis in 2008.
the height of the Lehman crisis in 2008.
8:31PM BST 01 Sep 2011
10 Comments
Central
banks and official bodies have parked record sums of dollars at the US
Federal Reserve for safe-keeping, indicating a clear loss of trust in
commercial banks.
Data
from the St Louis Fed shows that reserve funds from "official foreign
accounts" have doubled since the start of the year, with a dramatic
surge since the end of July when the eurozone debt crisis spread to
Italy and Spain.
"This
shows a pervasive loss of confidence in the European banking system,"
said Simon Ward from Henderson Global Investors. "Central banks are
worried about the security of their deposits so they are placing the
money with the Fed."
These
dollar accounts are just over $100bn (£62bn) and are small beer
compared to the vast sums invested in bonds as foreign reserve holdings.
Yet they serve as stress indicator, reflecting the operating decisions
of the world's top insiders.
Lars
Tranberg from Danske Bank said European banks are reduced to borrowing
dollar funds for "a week at a time" rather than the usual six to 12
months. "This closely resembles what happened in late 2008, though the
difference this time is that the major central banks have dollar swap
lines in place. If the dollar funding markets completely freeze up, the
European Central Bank can act as a backstop."
Mr
Tranberg said dollar deposits of US banks have increased by $400bn
since mid-June, mostly offset by dollar reductions in Europe. "It is
clear that the problem lies with the European banks. The credit default
swaps on these banks are very high and provide a risk gauge."
The
Bank for International Settlements says European and British banks have
a dollar "funding gap" of up to $1.8 trillion stemming from global
expansion during the boom that relies on dollar financing and has to be
rolled over. This is not normally a problem but funding can seize up in a
crisis.
European
officials hotly disputed claims in a leaked document from International
Monetary Fund claiming that a realistic "mark-to-market" of Italian,
Spanish, Greek, Irish, Portuguese and Belgian sovereign debt would
reduce the tangible equity of Europe's banks by €200bn (£176bn).
"French
banks passed stress tests which were extremely tough less than a month
ago: there is no cause for worry," said Valerie Pecresse, France's
budget minister.
"It is ill advised to provoke alarm," said Michael Kummer, head of Germany's BdB bank federation.
The
IMF was attacked as a Cassandra when it warned early in the credit
crisis that debt write-downs would reach $600bn, yet losses have since
reached $2.1 trillion.
European
banks are still struggling to access America's $7 trillion money market
funds. Fitch Ratings said last week that Spanish and Italian banks have
been cut off altogether.
Investors
do not fully believe EU pledges that the 21pc "haircut" agreed for
private holders of Greek debt is the end of the story, or will remain
confined to Greece, as the second Greek rescue is already unravelling. A
Greek parliament report concluded that deep recession is pushing the
country into a downward spiral, causing debt dynamics to fly "out of
control". Public debt will reach 172pc of GDP next year.
Simon
Derrick from BNY Mellon said Germany, Holland, and Finland may balk at a
third rescue in the current tetchy mood, implying bigger haircuts
instead. That will set a precedent for Portugal, and others. Until
markets can see an end to the blood-letting, Europe's banks will remain
untouchables.
end
In another commentary today Pritchard-Evans discusses the huge buckling of global trade:
There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.
- John Adams, 1826
Jim Sinclair’s Commentary
Consumer confidence plunges, expectations dive
By Ruth Mantell
Aug. 30, 2011, 10:00 a.m. EDT
WASHINGTON (MarketWatch) — Consumer confidence plunged in August as expectations dived, with worsening views on future business conditions, jobs and income, the Conference Board reported Tuesday. The nonprofit organization said its consumer-confidence index fell to 44.5 in August – the lowest level since April 2009 — from a slightly downwardly revised 59.2 in July. “A contributing factor may have been the debt ceiling discussions since the decline in confidence was well underway before the S&P downgrade,” said Lynn Franco, director of the Conference Board’s consumer research center, in a statement. Economists surveyed by MarketWatch had expected an August reading of 51.9. Generally when the economy is growing at a good clip, confidence readings are at 90 and above. The expectations barometer tumbled to 51.9 in August – the lowest since April 2009 — from 74.9 in July, while the present-situation gauge fell to 33.3 from 35.7.
More…
Jim Sinclair’s Commentary
U.S. has "enormous" debt problem: ECB’s Stark
CIGA Eric
Japan, Greece, and Italy have enormous debt problems.
Headline: U.S. has "enormous" debt problem: ECB’s Stark
ALPBACH, Austria (Reuters) – A debt crisis is still gripping the developed world, European Central Bank policymaker Juergen Stark said, adding there was no alternative but for countries to take painful steps to consolidate their public finances.
"The crisis is not over. Not just in Europe is it not over, it is also not over in other regions of the world," he said, adding the United States had an "enormous" debt problem and lacked the structures to get the problem under control.
Stark, a member of the ECB’s executive board, declined to discuss ECB monetary policy during a panel discussion at the Alpbach Forum economic conference on Thursday.
Source: finance.yahoo.com
More…
Market Commentary From Monty Guild
September 1, 2011, at 5:22 pm
by Monty Guild in the category Guild Investment | Print This Post Print This Post | Email This Post Email This Post
Uncertainty — A Drag on the U.S. Economy
One thing is becoming quite certain in the current U.S. economy: uncertainty.
In conversation after conversation with CEOs, we are hearing a similar litany of frustration. They want to expand business, hire more employees, and procure more equipment. All such undertakings would obviously help the economy. However, they are afraid to follow through because of three major uncertainties:
1. Uncertainty about the gridlock in Washington.
We are smack in the middle of a prolonged dogfight between ideologues on the left and the right of the political spectrum. The warfare almost kept the debt ceiling from expanding, which could have resulted in the U.S. default on it’s obligations.
Business leaders are expressing their exasperation. They wonder: what ever happened to compromise and moderation? How can anything be accomplished with polar opposites at war with one another, locked in stifling political discord that causes economic growth to suffer?
2. Uncertainty about the government regulatory environment.
Many CEOs complain about the unceasing and accelerating growth of regulations at the local, state, and federal level. They perceive the federal government as generally unfriendly towards business and business success.
3. Uncertainty about the minute-to-minute volatility of their stock prices due to an erratic marketplace.
High-frequency, computer-driven operators cause problems in the marketplace. They make money at investors’ expense. They push stocks down to unreasonably low prices that have nothing to do with the fundamentals. They undermine confidence in the markets. The volatility they exacerbate is destroying investor confidence little by little. Such unchecked price manipulation will ultimately sabotage the value and respect of the U.S. markets.
The high-frequency traders are permitted to operate because they make money for the stock exchanges. We assume they must have political clout because the SEC has done nothing to stop their corrosive activity. Business leaders we speak to are uniformly concerned that the market mechanisms are breaking down, and that the regulators just don’t seem to care.
As we write this letter, world markets are completing another month of high volatility. That’s bad for investor confidence and bad for corporate growth. If you can’t approximately forecast your stock price or valuation of your company, how can you plan financing, expansion, acquisition, or growth strategies? You can’t or you can’t do it well.
Such volatility is also bad for retirees and owners of pension funds and other retirement accounts. How are companies to judge how their retirees will be compensated?
Today’s uncertainty is putting business leaders in double handcuffs. They are having a hard time making important decisions. Job creation in the private sector requires the ability of employers to forecast and plan. That isn’t happening. Add in the regulation burden and stock market volatility and it’s no wonder expansion plans are getting shunted not just to the back burner, but to the freezer. The economy is lousy and all this is just making it lousier.
News Media: Ratings Trump Meaning
It’s no secret that the news media tends to exaggerate and emphasize here- and-now stories, often at the expense of more significant and far-reaching developments. That’s the nature of the business they are in. It’s all about ratings and counting eyeballs, and, alas, entertaining the folks. The U.S. media continues to focus on events within the U.S., often ignoring many important developments and events.
We in no way wish to minimize the real pain and suffering that hurricane/tropical storm Irene caused and is still causing in some areas, but the media seems to have missed the story. They mobilized their camera crews on the coastline days in advance, and then lost interest once the storm moved inland. It seems to us that the media’s primary efforts were at creating dread in advance of the storm. Many people have been negatively impacted by this storm, and their process of recovery will be a lengthy one, but to the media, cleanup and repair just aren’t glamorous stories.
With some exceptions, the media in general (especially television) seems unable to decipher and present stories with real impact. They don’t report on them until it’s too late. They often focus reporting on relatively short-term or less significant events meant to satiate viewers’ desires for entertainment and instantly-gratifying information.
We generally eschew television as a source of knowledge. We read a lot but are extremely skeptical about what we read in the press. We have a limited number of preferred media sources. The list includes the Financial Times, the New York Times, Wall Street Journal, the Economist, Barrons, Bloomberg BusinessWeek, Forbes, and Investors Business Daily. We read news dailies from several countries as well as industry-specific publications. The latter provide us good information, for instance, on energy, basic materials, technology, gold, medical, and other areas of interest to us. In addition, we review a significant number of individual country, industry, and company-specific research reports.
Talking to people in the trenches of commerce and industry is very valuable. Each year, we speak with hundreds of company executives either face-to-face at conferences and road shows, while travelling the globe, or on conference calls.
Investing is a very serious business. We have learned to be extremely careful about our information sources and what we believe. We always consider the source. You should do so as well.
Europe Closer To A Major Financial Crisis
European banks were not helped by the speeches last weekend of European Central Bank President Jean-Claude Trichet and International Monetary Fund Managing Director Christine Lagarde at the Jackson Hole conference of central bankers this past weekend.
Europe is in a major banking crisis. We’ve been following this shipwreck-in-the-making for many weeks now. Let us instead offer an excerpt from a report about a German court that may have a very big impact on the future of the Euro community, the Euro currency, and the European banking system.
Please click the following link to read the full article Euro bail-out in doubt as ‘hysteria’ sweeps Germany
Finally, Let Us Remind You That We Believe That The Europeans Will Do A Very Large QE To Solve This Problem
The QE will take place soon, and the stability of banks in Germany will be the reason that the German parliament will go along with the bail out and its long-term costs to the nation.
The QE is widely anticipated by the more sophisticated global investors, but others are still skeptical. It may cause a major market rally in many countries when it does take place. We believe that the world stock market rally of the last week is a prelude to what we could see when more people begin to realize that QE is coming from Europe.
The Venezuela Mess
The Organization of Petroleum Exporting Countries (OPEC) recently announced that Venezuela may have more oil than any country in the world. Good news for Venezuela, you would think, but necessarily so. That’s because the oil is located beneath quite inhospitable jungles. It’s difficult and expensive bringing it to the surface. Moreover, the crude is heavy and tar- like and thus very expensive to handle, transport, and refine. All these confounders call for a whole lot more ability than the incompetent government of Hugo Chavez can muster.
Chavez may know how to run a Bolivarian Revolution, but he is terrible at running an economy. As a result, Venezuela’s economy suffers from very high inflation and low growth.
Venezuela’s significant other problems include the following:
* a surplus of domestic currency that people believe will soon be devalued,
* a shortage of available U.S. dollar currency that can be used to buy assets,
* massive corruption, including the loss of 20 percent of the state oil company (PDVSA) pension fund to a Ponzi scheme fraudster connected to senior Venezuelan officials; $500 million was stolen,
* overstated government economic production statistics.
While Venezuela has huge oil reserves, the country’s production performance is anything but great. Chavez has taken over many companies and installed his loyalists to run them just like he did years ago to the state-owned oil company. His pattern is to fire those who protest and replace them with people long on ideology and short on competence and willingness to work. Thus, Venezuela has lost much of its capable technical oil industry people and suffers from less-than- competent management at almost all of the state-owned companies.
Recently, Venezuela recalled most of its gold reserves stored in unfriendly countries. One possible rationale for repatriation of the gold is a desire to clandestinely sell some of it to finance Chavez’s give-away programs, including building 2 million houses for the poor. He previously asked the PDVSA to fund the housing project from profits, but because of mismanagement the oil company doesn’t have the profits to do so. Could Chavez secretly sell some gold to finance his give-aways without telling the people of Venezuela? It wouldn’t surprise us. He’ll do whatever to create support among the impoverished class and help himself stay in power. We are not concerned that his potential sales depressing gold prices. You can be that many countries would scramble to buy the gold if it reached the market.
The bottom line is this: despite its huge natural resources, Venezuela falls far short of making it to our buy list.
Gold Mining Stocks And A Global Stock Market Rally
In our opinion, growing mining gold stocks will be beneficiaries of higher stock markets. Recently gold mining stock prices are moving partly with gold and partly with the stock market.
The recent rally in world stock markets is due to a belief that Europe, including Germany, has no alternative other than to do more QE, so the next QE on a big scale will be from Europe. Recent events in Europe and remarks from ECB President Trichet and the German cabinet confirm this. Markets believe that more QE is coming from Japan and from U.S.; all of this flows into world investment markets.
As money flows into investment markets and bond yields remain low, some of that money finds its way into stocks. Stock money will flow to growing parts of the world India, China, Indonesia, and etc.
We have noticed lately that investment dollars from the developed world go first into dividend payers, and secondly it goes into natural resource investments that can grow their reserves with exploration such as oil, gold, and base metals. Thirdly it goes into growth companies that can export and sell to the growing parts of the world, such as construction and farm equipment makers, aircraft makers, food companies, raw material producers, high tech companies with new products, food retailers, entertainment companies and consumer brand names (as you know the Chinese love brand names).
Therefore, we expect gold and oil rich companies to attract capital and investors as the market look for alternatives to hedge their declining U.S. dollars. Small and medium sized resource companies with growing reserves and a stable operating environment are the companies to own. With respect to stable operating environments, the drug war in Mexico and the political backdrop in Venezuela make those areas more difficult. On the other hand, Thailand, Malaysia, Tanzania, Indonesia, Philippines, Australia, Canada, and other safer resource provinces are going to attract attention.
Our Recommendations
We currently hold cash and gold. We hold some high-yielding Canadian and U.S. oil-producing companies. We are nibbling at attractive investments as they come down to our buy points. We are selecting specific companies in India, Norway, US, Canada, and several other markets. We expect to see more opportunities with time.
Changes will be coming so stay tuned!
Investing is a very serious business. We have learned to be extremely careful about our information sources and what we believe. We always consider the source. You should do so as well.
To request information about Guild Investment Management services and offerings please call (310) 826-8600 or email guild@guildinvestment.com
We thank you for the continued support, if you like to forward our commentary to a friend, please use the following link Forward to a Friend
end
In another commentary today Pritchard-Evans discusses the huge buckling of global trade:
Global Trade Buckles In Second Quarter
Global
trade buckled suddenly in the second quarter as Europe flirted with
recession and Asia came off the boil, while Canada's bellwether economy
contracted outright, adding to the darkening picture across the world. Container
Trade Statistics reports that shipping freight rates on the routes from
Asia to Europe have dropped to almost zero as a dearth of goods meets a
glut of vessels.
By Ambrose Evans-Pritchard, International Business Editor
8:43PM BST 31 Aug 2011
Import growth in the
large G7 economies and the China-led BRIC nations fizzled to 1.1pc
compared to a 10.1pc pace in the first quarter, according to the OECD
club of rich states.
In the UK the British
Chambers of Commerce reduced its forecast for GDP growth from 1.3pc to
1.1pc for this year and from 2.2pc to 2.1pc in the next. It said
prospects could improve "gradually".
Holland's
World Trade Monitor said global commerce contracted by 2.2pc in June
from the month before. Global trade volumes are back to levels seen in
December of 2010, though the falls are not yet comparable with the
dramatic collapse in late 2008.
Container Trade
Statistics reports that shipping freight rates on the routes from Asia
to Europe have dropped to almost zero as a dearth of goods meets a glut
of vessels.
Canada's economy shrank
0.1pc in the second quarter, hampered by wildfires in Alberta that hit
the oil and gas sector and by disruption to Ontario's car industry after
the Fukushima nuclear disaster in Japan.
"The Canadian economy is
still very fragile," said finance minister Jim Flaherty. "As we all
know global economic growth has been softer in recent months."
Mr Flaherty said the
Bank of Canada has scope to cut interest rates below 1pc if need be to
cushion any downturn, and insisted that the "fiscal fundamentals" remain
solid.
There were further signs that Asia is cooling. Korea's industrial output fell 0.4pc in July and is now the weakest in 10 months.
Japan's `V'-shaped
recovery from the Fukushima mayhem has also begun to sputter, with
industrial production growing far below expectations at just 0.6pc in
July. "The slowdown suggests that the recovery may have largely run its
course and that output may not fully recover its pre-disaster level,"
said David Rea from Capital Economics.
The global economy
appears to be at a key inflexion point – or a "dangerous new phase" in
the words of the International Monetary Fund.
America's ISM
manufacturing index to be released today is the most closely watched
gauge in the world. If it falls from 50.9 in July to below the
contraction line of 50, it will greatly increase fears of a fresh slump.
end
September 1, 2011, at 5:37 pm
by Jim Sinclair in the category In The News |
Print This Post | 
Email This Post
by Jim Sinclair in the category In The News |
Print This Post | Email This PostThere are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.
- John Adams, 1826
Jim Sinclair’s Commentary
Illustration number 3 of the Skier will without any doubt will occur.
Consumer confidence plunges, expectations dive
By Ruth Mantell
Aug. 30, 2011, 10:00 a.m. EDT
WASHINGTON (MarketWatch) — Consumer confidence plunged in August as expectations dived, with worsening views on future business conditions, jobs and income, the Conference Board reported Tuesday. The nonprofit organization said its consumer-confidence index fell to 44.5 in August – the lowest level since April 2009 — from a slightly downwardly revised 59.2 in July. “A contributing factor may have been the debt ceiling discussions since the decline in confidence was well underway before the S&P downgrade,” said Lynn Franco, director of the Conference Board’s consumer research center, in a statement. Economists surveyed by MarketWatch had expected an August reading of 51.9. Generally when the economy is growing at a good clip, confidence readings are at 90 and above. The expectations barometer tumbled to 51.9 in August – the lowest since April 2009 — from 74.9 in July, while the present-situation gauge fell to 33.3 from 35.7.
More…
September 1, 2011, at 5:32 pm
by Jim Sinclair in the category Jim's Mailbox | Print This Post | Email This Post
by Jim Sinclair in the category Jim's Mailbox |
Print This Post | Email This PostJim Sinclair’s Commentary
The problem is not only a dollar or euro problem, it is the entire Western world financial structure that is challenged.
U.S. has "enormous" debt problem: ECB’s Stark
CIGA Eric
Japan, Greece, and Italy have enormous debt problems.
Headline: U.S. has "enormous" debt problem: ECB’s Stark
ALPBACH, Austria (Reuters) – A debt crisis is still gripping the developed world, European Central Bank policymaker Juergen Stark said, adding there was no alternative but for countries to take painful steps to consolidate their public finances.
"The crisis is not over. Not just in Europe is it not over, it is also not over in other regions of the world," he said, adding the United States had an "enormous" debt problem and lacked the structures to get the problem under control.
Stark, a member of the ECB’s executive board, declined to discuss ECB monetary policy during a panel discussion at the Alpbach Forum economic conference on Thursday.
Source: finance.yahoo.com
More…
September 1, 2011, at 5:22 pm
by Monty Guild in the category Guild Investment | Print This Post Print This Post | Email This Post Email This Post
Uncertainty — A Drag on the U.S. Economy
One thing is becoming quite certain in the current U.S. economy: uncertainty.
In conversation after conversation with CEOs, we are hearing a similar litany of frustration. They want to expand business, hire more employees, and procure more equipment. All such undertakings would obviously help the economy. However, they are afraid to follow through because of three major uncertainties:
1. Uncertainty about the gridlock in Washington.
We are smack in the middle of a prolonged dogfight between ideologues on the left and the right of the political spectrum. The warfare almost kept the debt ceiling from expanding, which could have resulted in the U.S. default on it’s obligations.
Business leaders are expressing their exasperation. They wonder: what ever happened to compromise and moderation? How can anything be accomplished with polar opposites at war with one another, locked in stifling political discord that causes economic growth to suffer?
2. Uncertainty about the government regulatory environment.
Many CEOs complain about the unceasing and accelerating growth of regulations at the local, state, and federal level. They perceive the federal government as generally unfriendly towards business and business success.
3. Uncertainty about the minute-to-minute volatility of their stock prices due to an erratic marketplace.
High-frequency, computer-driven operators cause problems in the marketplace. They make money at investors’ expense. They push stocks down to unreasonably low prices that have nothing to do with the fundamentals. They undermine confidence in the markets. The volatility they exacerbate is destroying investor confidence little by little. Such unchecked price manipulation will ultimately sabotage the value and respect of the U.S. markets.
The high-frequency traders are permitted to operate because they make money for the stock exchanges. We assume they must have political clout because the SEC has done nothing to stop their corrosive activity. Business leaders we speak to are uniformly concerned that the market mechanisms are breaking down, and that the regulators just don’t seem to care.
As we write this letter, world markets are completing another month of high volatility. That’s bad for investor confidence and bad for corporate growth. If you can’t approximately forecast your stock price or valuation of your company, how can you plan financing, expansion, acquisition, or growth strategies? You can’t or you can’t do it well.
Such volatility is also bad for retirees and owners of pension funds and other retirement accounts. How are companies to judge how their retirees will be compensated?
Today’s uncertainty is putting business leaders in double handcuffs. They are having a hard time making important decisions. Job creation in the private sector requires the ability of employers to forecast and plan. That isn’t happening. Add in the regulation burden and stock market volatility and it’s no wonder expansion plans are getting shunted not just to the back burner, but to the freezer. The economy is lousy and all this is just making it lousier.
News Media: Ratings Trump Meaning
It’s no secret that the news media tends to exaggerate and emphasize here- and-now stories, often at the expense of more significant and far-reaching developments. That’s the nature of the business they are in. It’s all about ratings and counting eyeballs, and, alas, entertaining the folks. The U.S. media continues to focus on events within the U.S., often ignoring many important developments and events.
We in no way wish to minimize the real pain and suffering that hurricane/tropical storm Irene caused and is still causing in some areas, but the media seems to have missed the story. They mobilized their camera crews on the coastline days in advance, and then lost interest once the storm moved inland. It seems to us that the media’s primary efforts were at creating dread in advance of the storm. Many people have been negatively impacted by this storm, and their process of recovery will be a lengthy one, but to the media, cleanup and repair just aren’t glamorous stories.
With some exceptions, the media in general (especially television) seems unable to decipher and present stories with real impact. They don’t report on them until it’s too late. They often focus reporting on relatively short-term or less significant events meant to satiate viewers’ desires for entertainment and instantly-gratifying information.
We generally eschew television as a source of knowledge. We read a lot but are extremely skeptical about what we read in the press. We have a limited number of preferred media sources. The list includes the Financial Times, the New York Times, Wall Street Journal, the Economist, Barrons, Bloomberg BusinessWeek, Forbes, and Investors Business Daily. We read news dailies from several countries as well as industry-specific publications. The latter provide us good information, for instance, on energy, basic materials, technology, gold, medical, and other areas of interest to us. In addition, we review a significant number of individual country, industry, and company-specific research reports.
Talking to people in the trenches of commerce and industry is very valuable. Each year, we speak with hundreds of company executives either face-to-face at conferences and road shows, while travelling the globe, or on conference calls.
Investing is a very serious business. We have learned to be extremely careful about our information sources and what we believe. We always consider the source. You should do so as well.
Europe Closer To A Major Financial Crisis
European banks were not helped by the speeches last weekend of European Central Bank President Jean-Claude Trichet and International Monetary Fund Managing Director Christine Lagarde at the Jackson Hole conference of central bankers this past weekend.
Europe is in a major banking crisis. We’ve been following this shipwreck-in-the-making for many weeks now. Let us instead offer an excerpt from a report about a German court that may have a very big impact on the future of the Euro community, the Euro currency, and the European banking system.
Please click the following link to read the full article Euro bail-out in doubt as ‘hysteria’ sweeps Germany
Finally, Let Us Remind You That We Believe That The Europeans Will Do A Very Large QE To Solve This Problem
The QE will take place soon, and the stability of banks in Germany will be the reason that the German parliament will go along with the bail out and its long-term costs to the nation.
The QE is widely anticipated by the more sophisticated global investors, but others are still skeptical. It may cause a major market rally in many countries when it does take place. We believe that the world stock market rally of the last week is a prelude to what we could see when more people begin to realize that QE is coming from Europe.
The Venezuela Mess
The Organization of Petroleum Exporting Countries (OPEC) recently announced that Venezuela may have more oil than any country in the world. Good news for Venezuela, you would think, but necessarily so. That’s because the oil is located beneath quite inhospitable jungles. It’s difficult and expensive bringing it to the surface. Moreover, the crude is heavy and tar- like and thus very expensive to handle, transport, and refine. All these confounders call for a whole lot more ability than the incompetent government of Hugo Chavez can muster.
Chavez may know how to run a Bolivarian Revolution, but he is terrible at running an economy. As a result, Venezuela’s economy suffers from very high inflation and low growth.
Venezuela’s significant other problems include the following:
* a surplus of domestic currency that people believe will soon be devalued,
* a shortage of available U.S. dollar currency that can be used to buy assets,
* massive corruption, including the loss of 20 percent of the state oil company (PDVSA) pension fund to a Ponzi scheme fraudster connected to senior Venezuelan officials; $500 million was stolen,
* overstated government economic production statistics.
While Venezuela has huge oil reserves, the country’s production performance is anything but great. Chavez has taken over many companies and installed his loyalists to run them just like he did years ago to the state-owned oil company. His pattern is to fire those who protest and replace them with people long on ideology and short on competence and willingness to work. Thus, Venezuela has lost much of its capable technical oil industry people and suffers from less-than- competent management at almost all of the state-owned companies.
Recently, Venezuela recalled most of its gold reserves stored in unfriendly countries. One possible rationale for repatriation of the gold is a desire to clandestinely sell some of it to finance Chavez’s give-away programs, including building 2 million houses for the poor. He previously asked the PDVSA to fund the housing project from profits, but because of mismanagement the oil company doesn’t have the profits to do so. Could Chavez secretly sell some gold to finance his give-aways without telling the people of Venezuela? It wouldn’t surprise us. He’ll do whatever to create support among the impoverished class and help himself stay in power. We are not concerned that his potential sales depressing gold prices. You can be that many countries would scramble to buy the gold if it reached the market.
The bottom line is this: despite its huge natural resources, Venezuela falls far short of making it to our buy list.
Gold Mining Stocks And A Global Stock Market Rally
In our opinion, growing mining gold stocks will be beneficiaries of higher stock markets. Recently gold mining stock prices are moving partly with gold and partly with the stock market.
The recent rally in world stock markets is due to a belief that Europe, including Germany, has no alternative other than to do more QE, so the next QE on a big scale will be from Europe. Recent events in Europe and remarks from ECB President Trichet and the German cabinet confirm this. Markets believe that more QE is coming from Japan and from U.S.; all of this flows into world investment markets.
As money flows into investment markets and bond yields remain low, some of that money finds its way into stocks. Stock money will flow to growing parts of the world India, China, Indonesia, and etc.
We have noticed lately that investment dollars from the developed world go first into dividend payers, and secondly it goes into natural resource investments that can grow their reserves with exploration such as oil, gold, and base metals. Thirdly it goes into growth companies that can export and sell to the growing parts of the world, such as construction and farm equipment makers, aircraft makers, food companies, raw material producers, high tech companies with new products, food retailers, entertainment companies and consumer brand names (as you know the Chinese love brand names).
Therefore, we expect gold and oil rich companies to attract capital and investors as the market look for alternatives to hedge their declining U.S. dollars. Small and medium sized resource companies with growing reserves and a stable operating environment are the companies to own. With respect to stable operating environments, the drug war in Mexico and the political backdrop in Venezuela make those areas more difficult. On the other hand, Thailand, Malaysia, Tanzania, Indonesia, Philippines, Australia, Canada, and other safer resource provinces are going to attract attention.
Our Recommendations
We currently hold cash and gold. We hold some high-yielding Canadian and U.S. oil-producing companies. We are nibbling at attractive investments as they come down to our buy points. We are selecting specific companies in India, Norway, US, Canada, and several other markets. We expect to see more opportunities with time.
Changes will be coming so stay tuned!
Investing is a very serious business. We have learned to be extremely careful about our information sources and what we believe. We always consider the source. You should do so as well.
To request information about Guild Investment Management services and offerings please call (310) 826-8600 or email guild@guildinvestment.com
We thank you for the continued support, if you like to forward our commentary to a friend, please use the following link Forward to a Friend
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/silver/t24_ag_en_usoz_2.gif)
