Archive for category Investing

Oct 2014 Gold & Silver Update

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Lower lows for gold and silver.

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Gold testing triple support with MACD negative diverging.

Silver already below support.

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Hot News

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This appeared in the News today that is of great precedence.

  • Russia ratifies Economic Union and readies trade in currencies other than dollar

A new era of trade done primarily outside the dollar, and in national currencies such as the Yuan and Euro. This Union already has the support of several BRICS nations, as well as associate countries, and will help facilitate trade being done in a much smoother and easier way than what is currently used through SWIFT or other Western banking processes

  • China will use gold and gold pricing to force global currency reset

China is recognizing that physical gold is the ultimate catalyst to force an end to the [control] d… of purely fiat finance, and that by revaluing gold to its rightful price will have the effect of both protecting their own currency, and wresting financial control away from the … dollar hegemony.

Mid-Year Economic Update – 2014

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USA stable but not strong (2.5%), Europe stable but anemic (1.1%), Chinese GDP is lower but still strong (7.3% with ranges from 7.2% to 7.5%), Brazil improving (1.8%, from 1.0% however confidence is waning).  (Bloomberg).

The USA economic recovery is predicted by KKR Global to remain at work until 2017. However, it is not expected that major crisis would result in severe deterioration because the crisis was created in a single sector that grew to bubble proportions, at the moment there is no single sector growing, there is more uniformity (“the worst is over” idea, this time) (KKR Global)

On the longer horizon, the Chinese economy is structurally slowing and changing at the same time.  Exports continues down, internal consumption is increasing, government spending is down, infrastructure projects and investments are increasing.

These are the result of several drivers:

  1. Anti-corruption initiatives;
  2. Forced decline in lending back towards nominal GDP growth; and
  3. Increased competition across many of China’s export due primarily with rising cost of labor.

Manufacturing in Developed Markets is Up While in Emerging Ones is Flat

Shows manufacturing improvement in developed countries (less imports needed) while emerging countries (sources of imports) have reduced manufacturing.  In particular, China’s prior brand as the “Manufacturer of the World”, is no longer the case.  In summary, this chart below shows, more production in develop countries versus less exports in emerging countries, China in particular.

 

Inflation (as measured by CPI) Rising In Emerging Countries Since 2012 While Falling in Developed Countries.

Increase prices of products and labor in emerging countries contributes to increase in production cost of emerging countries making them less competitive compared to developed countries.

Silver on the Move

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As expected, silver has broken UP.  Then resistance is 22.0 level.

 

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With this weekly chart, we see Silver still have a lot of room for growth.  It has already passed strongly the 20.0 level and the next level after 22.0 is 28.0.

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As an additional piece of information, Baltic Index has deteriorated further.

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Silver and Gold On The Move

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After a correction from its peak in 2012, this week gold and silver made a strong move crossing over major resistance at 1280 settling above 1300.

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In the weekly charts, we can see the building of the base much clearer including the negative divergence for the past year since June 2013.  In both, daily and weekly charts, gold has crossed its first major resistance with strong impulse.

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The charts for silver represent the same however as an investment silver would represent a better return.

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Weekly.

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Other charts of interest in the background is the Baltic Index.

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BDI remains very anemic and in fact threatening a breakdown toward the low of 700.

Copper prices also does not show much strength in the growing economies like China.

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And steel (building of infrastructure and real estate and manufacturing equipment) is further repressed.

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Paper Currency – Summary History

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This article is worth reading…As it shows how paper money is designed to depreciate over time.

The History of Paper Currency
By Eric Tilden, eHow Contributor

The History of Paper Currency
The history of paper currency is rooted in the monetary exchange system, which replaced bartering for goods. Coins created with a specific amount of gold, silver or bronze established a uniform measurement of exchange, which was difficult to transport because of the weight. In the 19th century, paper money began appearing to replace varying coin systems, often as a result of regime changes but sometimes because of war. Early paper money was placed on the gold or silver standard, which allowed equal exchange of gold for the value printed on the paper.
China
o
The Chinese government, under the Sung dynasty, issued the first official paper money, which had an expiration date, was in short supply and was limited to select areas. The government required the money’s replacement every three years, charging the person a 3 percent service charge in order to exchange it for new money. The old money was never retired or destroyed, however, leading to rampant inflation by 1106. The Yuan dynasty abolished the expiration of the money, allowed the paper to equal hard commodity rates such as gold, silver and silk, and transitioned the old Sung currency to its own currency. This dynasty also abolished the use of metal currency in favor of the paper currency and demanded that taxes be paid in paper currency. An internal war caused rampant inflation and collapsed the currency altogether, leading to its total disappearance by 1500. In the 1890s, banknotes were issued based on the yuan, which was on the silver standard. The country issued currency through its banks, which led to differing currencies in the 1930s along with the Japanese who invaded at that time. Since 1948, China has been on the gold standard, calling its currency the gold yuan.
2. Scotland
o
The Bank of Scotland, established in 1695, issued 5, 10, 50 and 100 shilling banknotes, beginning its business ventures by making commercial loans and doing business with only the very wealthy. The bank introduced a 20-shilling banknote in 1704. Unlike modern paper money, these banknotes looked more like checkbooks without the perforated edge. The Scots were the first to incorporate color into their money in 1777.
3. Germany
o
In 1873, Germany issued its first paper currency, calling it the gold mark. German paper currency was called the papiermark, beginning in 1914 as the mark lost its link with gold because of World War I. In 1924, Germany introduced the reichsmark, replacing the papiermark because of the rising inflation. Because the value of a reichsmark was worth 1 trillion papiermarks, a rentenmark bridged the gap, which was based on the gold standard. In 1948, the United States, France and Great Britain issued the Deutsche mark to West Germany, replacing the reichsmark and rentenmark. The Soviets issued their version of the Deutsche mark later that year. In 1990, after the collapse of the Soviet Union, the West German Deutsche mark helped unify the country. In 2001, Germany joined the European Union, replacing the Deutsche mark with the euro.
4. Japan
o
In 1872, attempting to establish a standard type of money, the Meiji government established the first, widely accepted paper currency called the yen. The yen adopted the gold standard, and the first banknotes resembled U.S. banknotes. After World War I, the yen was tied to the value of the U.S. dollar, until 1973 when the United States abandoned the gold standard. As of 2007, the value of the yen has been kept low as the Japanese economy focuses on high exports, low interest rates and policies that strictly regulate inflation.
5. United States
o
The Massachusetts Bay Colony issued the first paper money on American soil in 1690. In 1775, the Continental Congress issued paper currency–called continentals–to pay for the Revolutionary War. Instead of backing the paper money’s value with precious metals, the money was backed with anticipated tax revenues, which led to counterfeiting and devaluation. Established in 1791, the first bank of the United States issued banknotes to eliminate confusion and simplify trade. In 1861, Congress authorized the United States Treasury to issue paper money called demand notes, which were non-interest-bearing, in order to pay for the Civil War. In 1865, the U.S. Treasury issued gold certificates against gold bullion deposits, taking them out of circulation in 1933. In 1877, the U.S. Treasury took over all printing and engraving in 1877. In 1973, the Unites States departed from the gold standard.

Baltic Index Update – Jan 2013

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The Baltic Index is back to the 600 level (699).

 

It has though entered a territory of oversold.  The Baltic Index has differed substantially from the domestic USA railfax report.

Quantum Leap Story – Inspiring to the Real Entrepreneur

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There is more to learn in this article than what any MBA at any university teaches.

“Billionaires do not become billionaires by getting into a diversified mutual fund or investing in an ETF or investing in the S&P Index Fund,” Miller tells The Daily Ticker. “You get rich by building equity in a very concentrated position that is typically one big company.”

Most billionaires are also in the retail or commodity industries, he says. “Retail is a huge presence,” Miller notes, adding that 26 billionaires on Bloomberg’s list started their careers in retail.

Twenty-two billionaires on the list have made their fortunes in technology, and 14 are a part of a family business (ie thru inheritance or marrying a rich man).

The story is here (appeared in the Bloomberg Billionaire Index)

Money can’t buy happiness goes the old adage, but if it could Amancio Ortega would be floating on cloud nine.

Ortega is a relatively obscure 76-year-old retail magnate and founder of the Spanish company Inditex SA. Inditex owns and operates various clothing brands with over 5,402 stores around the globe; the crown jewel of Inditex is Zara, which has over 1,600 store locations.

Between January and October of 2012, Ortega earned more than $18 billion — that’s around $66 million a day. During this short period he usurped Warren Buffett to become the third wealthiest person in the world with a net worth valued at $53.6 billion.

Ortega was born to a impoverished railway worker and had to drop out of school at 13 to work. He began as a delivery boy for a clothing shop and worked his way up to become a salesperson. While working retail Ortega had the idea to sell inexpensive versions of quilted bathrobes, claiming it was unfair that only wealthy woman could afford to dress well. He used this as the founding principle behind the rest of his retail ventures and built his empire on top of it.

Ortega’s rapid gain corresponds with a general rise in retail stocks. Cheap supplies and increasing demand for moderately priced clothing have made it a good year for retailers. Nine out of the world’s 25 richest people made their fortunes in retail, according to the Bloomberg Index.

Physics tells us that what goes up must come down and unfortunately that’s exactly what happened to some billionaires’ fortunes this year.

Ricardo Salinas Pliego who runs Grupo Elektra in Mexico is the biggest loser on the list. Pliego lost $9.1 billion year-to-date. His net worth is now $11.7 billion, making him the eightieth richest person in the world. The banking and media tycoon has seen the value of his stock holdings nearly cut in half since April 2012.

Another famous loser is Facebook’s Mark Zuckerberg.

Before Facebook’s IPO, Zuckerberg was estimated to be worth up to $20 billion. The social network’s stock has underperformed since its May stock market debut Zuckerberg’s net worth has dropped by $10.7 billion. But he’s still the world’s 88th richest person.

SURPRISE ADDITIONS

Bloomberg was able to uncover ten new billionaires who had never before been on an international wealth ranking.

Dirce Navarro de Camargo has become Brazil’s wealthiest woman after inheriting her late husband’s industrial empire, Camargo Correa SA. Camargo is the world’s 60th richest person with a net worth of $13.1 billion.

Elaine Marshall owns a 15% stake in Koch Industries, with a net worth of $12.9 billion. She ranks as the 69th richest person in the world. Marshall, who is America’s 4th richest woman, inherited the shares from her late husband, E. Pierce Marshall.

Marshall’s last public appearance was in 1994 when her father-in-law’s widow, Anna Nicole Smith, became entangled in a long legal battle over his trust. Marshall was ultimately granted his shares in Koch and now lives a quiet life in Dallas, Texas.

LEARNING FROM BILLIONAIRES

“Billionaires do not become billionaires by getting into a diversified mutual fund or investing in an ETF or investing in the S&P Index Fund,” Miller tells The Daily Ticker. “You get rich by building equity in a very concentrated position that is typically one big company.”

Most billionaires are also in the retail or commodity industries, he says. “Retail is a huge presence,” Miller notes, adding that 26 billionaires on Bloomberg’s list started their careers in retail.

Twenty-two billionaires on the list have made their fortunes in technology, and 14 are a part of a family business.

Overall, “it’s been a great year for billionaires,” Miller says. “If you look at the top 100 everyday, traditionally they’ve been up. The S&P is up for the year and private fortunes track public markets.”

The necessary teachings to become one of these tycoon are not taught in school but are neither inherited and are also irrespective of actual conditions.  Starting early helps!

Europe Economic Update – October 2012

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The EU Zone flash composite PMI misses it estimate and falls to 45.8 to a 40-month low. Flash manufacturing PMI falls from 46.1 to 45.3, below expectation.  Service sector rises from 46.1 to 46.2 a very marginal – if any – rise, also below expectation.

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Germany’s manufacturing PMI fell from 47.4 to 45.7, much worse than expectated.  Services also remain rather unchanged services but with a slight fall from 49.7 to 49.3, also below expectation. On the other side, France’s manufacturing PMI rises from 42.7 to 43.5, but also below expectation.  Services rises from 45.0 to 46.2, better than expectation.

 

Financial & Banking Comparizons USA and China Today!

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The U.S. Banking System Today
As of October 2012, the status of the banking system in the USA is the result of events from 5 years ago.
In 2007, the U.S. banking system (and the European banking system also), experienced a major “shortage” in lending, in part due to the lack of banks balance sheets stemming from the sub-prime lending problems. Banks were considered high risk and their risk premiums increased dramatically due to the lack of safety margins and uncertainties of which banks would fail (or would require a government bailout, which meant privatization resulting in the equivalent as investors losing their investment). All this banking crisis resulting from many banks having issued large of quantities of loans of inferior qualities to high risk debtors – marginal and low income borrowers.
The phenomena that built up the crisis culminating in the bursting starting in September 2007, was an unordinary increase in real estate prices in the USA which kept rising higher to bubble proportions. Loans made by banks in the form of real estate mortgages have been made based on ever higher valuations of the underlying real estate collateral. In an attempt to slow the inflationary bubble, the Federal Reserve raised interest rates, making it more difficult to borrow additional funds and to service adjustable rate mortgages. Consequently, more homeowners/real estate speculators have defaulted on their loans and the values of the underlying collaterals have dropped substantially in many locations. Bankruptcies went on the rise, eliminating job and a negative spiral started on more loan defaults and more bankruptcies, more jobs lost, more loan defaults. Then Fed action to pump back the moribund economy and attempt to prevent further defaults by lowering and maintaining interest rates low to historical proportions.
China Banking and Economics Today
China felt the effect of the US financial crisis of 2007-2009 as consumer demand slowed reducing imports from China. China responded with monetary stimulus of large proportion and lowered interest rates in addition allowing for individual to purchase multiple real estate units when before it was limited to the population. Real estate prices have increased to great proportions and the central bank in China reduced liquidity, increased interest rates and restricted loans in order to cool the inflationary pressures in real estate and other natural resource areas.
While bankruptcies and loss of jobs also occurred, the difference in China compared to the USA is that a large percentage of the population is less dependent on loans and there is much cushion in savings at all levels, personal and government. There still exists close to 60 trillion of personal investable assets and government federal and government owned enterprises also have vast cash and asset in reserves to cushion a crisis.

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