zaterdag 31 december 2011

Russia US Treasury Holdings

We already know Japan and China were going to dump US treasuries. I indicated in a previous post that China was going to cut more than 60% of its US treasury holdings.
But what I didn't know is that also Russia is dumping its US treasury holdings.
This chart says it all:

Since last year Russia dumped 38% of its US treasury holdings from $176 billion dollars to $110 billion dollars and will likely continue dumping.
What I don't get is how the 10 year US treasury yield is still below 2%... Soon, that will change.

O-metrix Score

I discovered a nice tool to filter on every stock you pick. It is important to search for stocks that have following characteristics:
1) low P/E ratio
2) high earnings growth
3) high dividend yields
The O-metrix tool will calculate a ratio based on this formula:
O-Metrix = (Dividend Yield + EPS Growth) / (P/E Ratio) X 5
The higher the O-Metrix score, the better the company. I would pick companies with an O-Metrix score higher than 3.
The tool is free and downloadable here:
O-metrix tool
The O-metrix tool has one Achilles vulnerability and it's quite a big one too. It doesn't take in account the Price to Book ratio. It is very risky to buy companies with a high Price to Book ratio as they can fall very hard when their earnings growth plunges.

Which country has the most foreign exchange reserves + gold?

When it comes to how much Foreign Exchange Reserves + gold a country has we can have 3 different statistics:
1) FER + Gold per capita
2) FER + Gold as a % of GDP
3) FER + Absolute amount of gold reserves

1) FER + Gold per capita:
The leader here is Singapore with $36000 USD per capita.
Hong Kong  is second with $22000 USD per capita (I have seen all those gold shops in Hong Kong, it really is amazing).
United Arab Emirates is third with $17000 USD per capita.
Japan has $7500 USD per capita.
China has $1100 USD per capita.
India has $240 USD per capita.
(Belgians have only $1500 USD FER + gold per capita, which is a shame.)

2) FER + Gold as a % of GDP:
Libya and Singapore have more gold reserves than GDP. Ratio = 1.1
Hong Kong: FER + gold reserve is 70% worth of GDP
Taiwan and China: FER + gold reserve is 40% worth of GDP
Vietnam, Japan, India: FER + gold reserve is 20% worth of GDP
Belgium: FER + gold reserve is only 2.5% of GDP (what a shame again)

3) Absolute amount of FER + Gold reserves:
First is China: 2.6 trillion USD 
Second is Japan: 1.1 trillion USD
Third is Russia: 500 billion USD 

All the FER + gold (aka money) is situated in Asia. And Asia will be the richest place on the world.

Zero Hour

I don't know if I've shown this curve yet, but it is too important not to talk about it.
We are in 2012, the time where additional debt doesn't grow the economy. Which means you need to print an eternal amount of money to grow GDP. This means hyperinflation.
Everything will collapse soon, so I would place my money in precious metals.

Chart 1:
Zero Hour

Another sign of the end nearing is the outlays (government spending (pensions, medicare, social security)) compared to foreign debt. Historically, once 40 % of outlay spending comes from foreign debt, then the country is relying too much on foreign debt for its spending needs and this results in hyperinflation (James Turk:

Quote (James Turk): As further proof that the Havenstein moment is behind us, consider that 58% of the money spent by the federal government in October and November came from borrowed money ($320 billion of debt against $551 billion of expenditures). Monetary history shows that governments are on a hyperinflationary path when crossing the 40% threshold, a level long passed by the federal government.

Following chart shows the level of deficits relative to expenditures before hyperinflationary periods. As you can see, above 40% means hyperinflation:

Chart 2:
budget deficits prehyperinflation

Following chart says that Japan and recently USA are on the verge to go to hyperinflation:

Chart 3:
us japanese deficits

For 2010:
Outlays in 2010 (see chart 6): 3,3 trillion USD
External Debt increase in 2010 (see chart 4 and 5): 1.3 trillion USD

1.3 trillion USD / 3.3 trillion USD = 39 % (almost hyperinflationary)

Chart 4:

Chart 5:

Chart 6:
Outlays Spending

Going back to the Belgian Frank

See what happens when Belgium goes back to the Belgian Frank.
We lose 23,9% of our money. More reason to buy gold.

Gold Money Index (James Turk)

There is this Gold Money Index that gives the fair price of gold. (James Turk)

                                   Central bank foreign exchange reserves (USD)
Gold Money Index =    ----------------------------------------------------------------------
                                        Central Bank Gold Reserves (ounces)

I quickly took some numbers from Wikipedia for foreign exchange reserves:

 China 3197 billion USD
 Japan 1137 billion USD
 Eurozone 886 billion USD
 Russia 510 billion USD
 Saudi Arabia 456 billion USD

Total ~ 12000 billion USD

Then I quickly took some numbers from Wikipedia for gold reserves in central banks:

 USA 8133 tonnes
 Germany 3401 tonnes
 Italy 2452 tonnes
 France 2435 tonnes
 China 1054 tonnes
 Switzerland 1040 tonnes
 India 946 tonnes
 Russia 836 tonnes

Total ~ 1000 million ounces of gold

Gold Money Index = 12000 billion USD / 1000 million ounces = 12000 USD/ounce

So basically we have a gold price of 1500 USD/ounce today and are supposed to have a fair price of 12000 USD/ounce of gold. That's an eightfold increase in the gold price. If what James Turk says is a good valuation of gold, then we're in for a big ride upwards.

To learn more about the Gold Money Index, please go to:
Gold Money Index

Who ows who?

A very nice interactive diagram to see which country owes debt to another country.

vrijdag 30 december 2011

Chris Martenson's view on the economy after 20 years

If you haven't watched it, you should.

Chris Martenson has his view on what the world will be like in 20 years from now:

I predict that oil, food, ground, basic commodities (especially silver will be depleted in 10 years) will become scarce. Prices will be much higher than today. World population will continue to grow at least for 10-20 years. When oil is not affordable anymore we will need to go to electrical energy/natural gas. And when that isn't affordable anymore the whole economy will slow down unless we find another energy source.

It will not happen in another lifetime, it will happen just in 10 years time, don't be fooled.
Be prepared and buy up all resources while you still can!

PSLV PHYS premium in function of time

From today on I'm going to monitor the premiums of PSLV and PHYS in function of time and monitor the stock price of PSLV and PHYS. I also asked HR to send me the numbers, let's see if they will do it.

Then after a while I'll try to see if there is any correlation between price movements between the premium and the share price of PSLV and PHYS.

These below are the premium and the price charts for PHYS (2010):


Looks like both charts correlate well. Premium goes up, price goes up. This happened until September 2010. Then suddenly the premium went down while the price of PHYS went up. I need more data to get to a conclusion...

For an analysis of PSLV go here: