Corporations Join Droves Renouncing US Citizenship

By Nick Giambruno
Senior Editor, InternationalMan.com

money160Don’t be surprised to lose if you don’t make an effort at being competitive.

And if you go out of your way to make yourself less competitive, expect to lose.

If that sounds like simple common sense, that’s because it is.

But it’s also exactly what the US has been doing for years — enacting tax policies that sabotage its global economic competitiveness.

It’s like trying to get in shape for a marathon by going on an all-McDonald’s diet. (Speaking of McDonalds, check out this funny video spoof of what their commercials should really look like.)

Here are two major reasons why the US is lagging in the global economic marathon:

  1. The US has the highest effective corporate income tax rate in the developed world (see chart below).
  1. Unlike most other countries, which only tax domestic profits, the US taxes the earnings of foreign subsidiaries of US companies when the money is transferred back to the US. This has had the effect of US corporations keeping over $1.9 trillion in retained earnings offshore to avoid the crippling US corporate income tax.

These “worst in the developed world” tax policies are clearly hurting the global competitiveness of American companies.

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Watch ‘Real’ Interest Rates for a Clue

By Jay Taylor
Jay Taylor Media

Jay Taylor

Jay Taylor

As I was driving back from a visit to my family in Ohio, one market pro was voicing concerns on Bloomberg Radio that the Fed is in danger of “falling behind the curve,” as happened in the 1970s when the inflation rate began to rise dramatically and when the price of gold shot up to a climactic $850 by January 1980 from a little over $100 in 1978.

At that time I was a young man who was very interested in what was going to happen after Nixon caused the U.S. to default on its promise to convert dollars into gold, and it was at that time that I declared myself an unapologetic “gold bug.” To me this looks like “déjà vu all over again!” I recall how hard-money advocates were concerned about inflation but the likes Fed chairmen Arthur Burns and G. William Miller and other Wall Street thieves were putting out propaganda up until late 1979, saying that inflation was well contained as they continued to create more fraudulent dollars out of nothing at a faster and faster pace.

priceFinally interest rates began to rise and pick up steam at an exponential rate of speed. But rising even faster than nominal interest rates were was the CPI, which meant that real interest rates were actually declining. As people began to realize that their dollar’s purchasing power was declining big time, they began to look for ways to protect their wealth by trashing dollars and buying tangible assets, most logical of which were gold and silver. Gold rose to $850 from $35 at the start of the decade and silver rose from around $2 to $50. The evidence of the correlation of higher gold prices with a decline in “real” interest rates is shown on the chart above, again thanks to Dan Oliver, with whom I will be talking on my radio show next week.

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Gold Jewelry Demand in India Improves

By Frank Holmes
U.S. Global Investors

Pankaj Parakh, an Indian businessman, wearing his gold shirt, valued at $210,600.

Pankaj Parakh, an Indian businessman, wearing his gold shirt, valued at $210,600.

Those who root for gold root for India. Despite a welcome June rally, it’s been a rocky second quarter for the world’s second-largest consumer of the metal, with demand down 18 percent compared to last year. But consumer appetite seems to be on the upswing following a tepid July. Gold premiums rose to between $10 and $13 a troy ounce this month, compared to zero last month. Such premiums are good indicators that buyers are willing to spend more on gold jewelry and other forms of bullion.

That premiums have risen also suggests that Indians are making their gold purchases ahead of Diwali, or the Festival of Lights, a traditional time to participate in what I call the Love Trade. This year Diwali begins on October 23.

Other global celebrations and events that trigger the Love Trade include the Indian wedding season, the Chinese New Year, Ramadan and, of course, Christmas.

Challenges Affecting Demand Continue reading

Alasdair Macleod

: The three biggest reasons to invest in gold

In this interview conducted for Matterhorn Asset Management, Lars Schall has a conversation with Alasdair Macleod. Together they talked about, inter alia: the challenges for the London Bullion Market Association (LBMA); China’s appetite for gold; the Shanghai Cooperation Organization as the player in the gold market in the future; and the problems related to Germany’s gold at the New York Fed.

Macleod started his career as a stockbroker in 1970 on the London Stock Exchange, and learned through experience about things as diverse as mining shares and general economics. Within nine years Macleod had risen to become a senior partner at his firm. He subsequently held positions at director level in investment management, fund management and banking.

For most of his 40 years in the finance industry, Macleod has been de-mystifying macro-economic events for his investing clients. The accumulation of this experience has convinced him that unsound monetary policies are the most destructive weapons that governments can use against the people. Accordingly, his mission is to educate and inform the public, in layman’s terms, what governments do with money and how to protect themselves from the consequences.

Peter Hug: There’s Still An Underlying Bid For Gold

In this interview with Kitco’s Daniela Cambone, Peter Hug talks about gold, geopolitics and PGMs on this edition of “For Pete’s Sake”. He tells Kitco News that global unrest is still providing a floor for gold. “I still think that there’s an underlying bid to the gold market coming out of the Ukraine and, to some extent, coming out of the Israeli-Hamas situation.”

Hug adds that the metal is also getting support from President Obama’s recent announcement allowing surveillance over Syria. He also comments on US durable goods orders that came out better-than-expected this morning, as well as whether or not he thinks the Fed will start to raise rates. Finally, Hug shares his thoughts on the record-breaking S&P 500 as well as the PGMs

Comex Gold Warehouse Stocks Swell As Physical Demand Slumps

By Debbie Carlson
Kitco News

gold22Light physical gold demand has been a common theme in the gold market for the past few months, with gold forward rates and Shanghai Gold Exchange premiums low or sometimes negative.

Another sign, albeit less widely watched, is the rise in Comex gold warehouse stocks. As of Aug. 25, the combined total of registered and eligible warehouse stocks was 9.863 million troy ounces, the highest since March 11, 2013, when they were at 9,863,758.707 ounces, according to CME Group data. But a recent peak in the 11 million ounces level was as high in January 2013.

In 2013, Comex warehouse stocks were in a decline, said Erica Rannestad, senior analyst, precious metals demand at Thomson Reuters GFMS. This year, however, Comex warehouse stocks have been rising. In mid-April Comex warehouse stocks were around 7.9 million ounces.

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Juniors and Midtiers Poised for M&A-Fueled Breakout Once Gold Recovers

Michael Fowler

Michael Fowler

Michael Fowler, senior mining analyst with Toronto-based Loewen, Ondaatje & McCutcheon, predicts when gold breaks out, mining M&A will take off. He expects the major producers to lead the next rush of M&A. The majors want development-stage companies with high-grade, near-term production assets, and Fowler suggests some targets in this interview with The Gold Report.

Fowler has worked in the investment industry since 1987 as a base and precious metals mining analyst for numerous high-profile firms. His coverage list included the major North American gold mining companies, but is now focused on small- to mid-sized companies. Previously, Fowler worked as a geophysicist involved in mineral exploration for 10 years. He was involved in the discovery of the high-grade Cigar Lake uranium mine in Northern Saskatchewan in the early 1980s. Fowler holds a Master of Business Administration from Cranfield University, UK; a Master of Science in mineral exploration from Leicester University, UK; and a Bachelor of Science in geology with geophysics from Liverpool University, UK. He is a member of the Institution of Materials in the UK and a member of the Canadian Institute of Mining and Metallurgy.


Source: Brian Sylvester of The Gold Report

The Gold Report: A report titled “M&A and Capital Raising in Mining and Metals, 1H 2014″ from Ernest and Young (EY) says that mining and metals deal values in H1/2014 are “down 69% year-on-year, to $16.7 billion ($16.7B), from $53.8B, with deal volumes down 34% over the same period.” Why aren’t more mergers and acquisitions (M&A) happening in the precious metals space?

Michael Fowler: The first reason is that there are some big egos in the mining sector and some mining companies would prefer to go it alone or at least be in charge. But if both companies want to be in charge, someone is going to lose out. Ego is a big factor.

Pretium Resources Inc. will be looked at strongly by some larger companies.

Job entrenchment is a second reason. CEOs, for example, want to keep their jobs versus being kicked to the curb.

Third is asset quality. Miners looking at other companies believe that their own assets are of superior quality and those of targeted companies are poor. Generally, asset quality is not high.

Number four is transaction costs. It costs a lot of money to make a transaction, especially for small companies with limited cash.

TGR: Obviously, there were more transactions last year and the quality of assets couldn’t have changed a lot since. How do you define poor quality?

MF: We define that by the return to the prospective acquirer. As companies look at some of these assets, they see decreasing mining grade or reserve grade. That means cash margins will be less than what they would have been, say, 10 years ago. Grade plays a large role in determining the economics of putting a deposit into production and making a profit. I should note, too, that recently I have seen too many overly optimistic feasibility studies and scoping studies or what they now call preliminary economic assessments (PEA). Generally, asset quality isn’t that high.

TGR: Overly optimistic feasibility studies and PEAs. Are you suggesting that recoveries won’t be as high as expected? That capital numbers are generally too low? Mine life will be shorter? All of the above?

MF: All of the above and more, particularly in the case of PEAs. The stated returns in some of these reports are far too optimistic.

TGR: EY estimates that mining-focused private equity funds may have as much as $10B ready to deploy in the mining sector. What is private equity seeking?

MF: Most of the private equity firms want big assets. They are not interested in small exploration plays or tiny companies. They want assets that are in production or near production, perhaps offloaded by majors looking to trim debt; other targets could be companies with big development projects with juicy returns. Pretium Resources Inc. (PVG:TSX; PVG:NYSE) is one example. In April, Boston-based Liberty Metals & Mining Holdings bought roughly 5.78 million (5.78M) Pretium common shares at CA$6.92 apiece and received a seat on the board. Private equity wants to be involved in the decision-making.

TGR: Typically, how large are these private equity deals?

MF: Private equity generally wants to have a big chunk of a company, typically 10–20%, maybe more in some cases. It’s about having a say in what these companies do.

TGR: Why not outright takeovers? Continue reading

Will There Be a New Gold Rush? — Ian Gordon, Longwave Analytics

By Henry Bonner
Sprott Global

Ian Gordon

Ian Gordon

Ian Gordon created Longwave Analytics, which studies the Longwave principle, by which economies obey long-term cyclical trends of expansion and contraction. Eric Sprott is an avid reader — he suggested I interview Ian Gordon for his take on the role of Kondratiev’s ‘long wave cycle’ in explaining the economic environment we are seeing today.

Ian said ‘winter’ was coming for the world economy, though it has been staved off by the flexibility provided by paper money. As a result, a depression will be very different today than in 1929 or 1873, he believes. But now, as then, we could see a massive push for new gold discoveries.

Mr. Gordon explained how he got to know Eric Sprott over 10 years ago:

“I was writing about long-term economic cycles, referred to as ‘Kondratiev’ cycles. In 1998, I realized that we were close to the top of a bull market; we were somewhere akin to 1928 — immediately preceding the Great Depression. Eric appreciated my work, because it helped explain an imminent bull market for gold, which he saw as well.”

I asked: Do these ‘long wave’ economic patterns explain today’s bear market for gold — and the recent rally in general stocks?

“Well, they didn’t predict this — but they can help explain why it’s happening. Over the course of one entire ‘long wave’ economic cycle, covering a full expansion and subsequent contraction, you have what I call four ‘seasons.’ Winter is the period where debt is wiped out of the economy. It happened after 1929, which caused the US banking system to collapse. During the 1920’s, there had been a big build-up in consumer and corporate debt, as well as sovereign debt.

“During the Great Depression and the previous depression of 1873, we were on a gold standard system, so the ability to create money was limited. This time around, we are in a pure credit-based system, so the ability to create money withstands the ravages of the winter. Effectively, governments have been creating more debt. This will ultimately cause a more horrendous economic decline than in either 1929 or 1873, as debt levels are far greater today — and because the world is much more inter-connected financially.”

What about your prediction of a ‘new gold rush’ similar to the late 19th century?

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The Gold To Silver Ratio Could Be Peaking

By Jason Russ
Seeking Alpha

silgold160The current gold/silver ratio is near 66, which is bullish for silver. The average of the ratio over the last four years was about 55. I predict a 25% rise in silver prices within 12-18 months.

How do we measure its worth? One important metric is the gold to silver ratio. That is, simply the price of gold divided by the price of silver.

There has always been a high correlation between gold and silver prices. In fact, throughout much of history, the ratio was fixed. Here are some highlights (source – investopedia.com):

  • 323 B.C.: The ratio stood at 12.5 upon the death of Alexander the Great.
  • Roman Empire: The ratio was set at 12.
  • End of 19th Century: The nearly universal, fixed ratio of 15 came to a close with the end of the bi-metallism era.

In ancient Egypt, when silver was first introduced it was very likely more valuable than gold. Those Egyptians from around 2500 B.C. considered gold to be the skin of the ancient Egyptian gods and silver to be the bones.

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Why aren’t gold prices rising?

By Michael Lombardi
Trefis

Vladimir Putin

Vladimir Putin

The numbers are in . . .

In the second quarter of 2014, world central banks bought 117.8 tonnes of gold bullion compared to 92.1 tonnes a year earlier — a jump of 28%. Central banks have been net purchasers of gold bullion for 14 consecutive quarters!

According to the World Gold Council, “Economic and geopolitical events throughout the world are sources of ongoing instability and uncertainty. Such events reinforce the requirement for appropriate risk management by central banks through holding gold reserves for asset diversification.” (Source: “Gold Demand Trends Q2 2014,” World Gold Council web site, August 14, 2014.)

Hog wash, I say. Central banks are buying gold bullion because they are slowly moving away from U.S. dollars as their reserve currency and replacing them with gold bullion.

In the second quarter, Russia purchased 54 tonnes of gold bullion, Kazakhstan purchased seven tonnes, and Tajikistan bought three tonnes. Combined, just these three central banks made up more than 54% of all the official purchases of gold bullion in the second quarter.

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