maandag 28 april 2014

China Power Consumption Rises in March 2014

China's March power consumption was up year over year, but not by much: 7.5%.

It is right in line with the 7.5% year over year GDP growth rate. So the days when china grew more than 10% are over for now.

China Gold Imports From Hong Kong Drop in March 2014

It was to be expected that gold imports from Hong Kong to China would drop as we could clearly see that the SGE withdrawals were declining and oversea premiums were at zero. Chinese are indeed buying less gold.

I expect this declining trend to continue for the next month. Even though the trend is lower, it is still well above the 2012 level. This is especially true because China now allows gold to be imported via Beijing.

vrijdag 25 april 2014

Yellen Tapering to Continue?

So Janet Yellen reduced QE from $65 billion/month to $55 billion/month in March 2014.

Let's see if this is really the case.

Wednesday, April 2, 2014: $4.236441 trillion.

Wednesday, April 23, 2014: $4.296339 trillion

If I'm not mistaken: 4.296339 - 4.236441 = 59.898 billion. That's already over $55 billion and the month of April isn't even over yet.

So if they can't even properly execute the tapering to $55 billion/month, do you think they will be able to continue tapering to $45 billion/month on the next FOMC meeting of 30 April? Especially when the stock market is rolling over?

We'll soon find out next week. "Belgium" will be buying all these tapered bonds anyway.

Gold Backwardation Gets More Extreme

Today, the gold backwardation went into an extreme. The 12 month GOFO rate went to 0.06, a new historic low. At this rate we will be in backwardation on the 1 year GOFO rate in a few days. The fundamentals get better and better. Also the gold premiums are rising again on APMEX. And I can't imagine what will happen when the Russian situation escalates. And don't forget that the yuan is collapsing to new lows as we speak. Japan has the highest inflation in a decade. Unemployment in Europe is hitting new highs. Stock market bubble in U.S. is about to collapse. Etc...


woensdag 23 april 2014

The Effect of Russia Sanctions: Russia Targets Belgium Steel Industry

What is nice about this blog is that you get news from other parts of the world, outside the U.S, namely Belgium.

Apparently Russia is threatening to close down one of the European division of the major Russian steel giant NLMK ($7 billion market cap) if sanctions were to go through. We're talking about 1000 jobs lost in Belgium due to these possible sanctions.

This is only one country, I can imagine that many other European countries will see an effect of the Russia sanctions.

And when efficiency is lost in the economy, inflation will arrive sooner than later.

zondag 20 april 2014

BNP Paribas Banker Murdered

Another tragic event took place this weekend. Benoit Phillipens, bank manager of BNP Paribas' agency at Ans/Saint-Nicolas, Belgium, was killed along with his wife and god-child. The shocking thing is that this happened in the country where I live in. Belgians usually don't attract problems.

This is the 18th banker death. It looks to me that being in the finance industry isn't a very safe job at this moment. This indicates to me there is definitively stress in the financial system.

U.S. Mint Sales Surprisingly Favor Silver

It is time to take a look at the U.S. Mint sales of gold and silver again to see if we can get some interesting conclusions out of it. We know that the U.S. Mint sales are a good proxy for global gold and silver investment demand.

Here is the data:

Chart 1: U.S. Mint gold and silver sales (ounces) (april 2014 extrapolated)
What immediately surprises me is that the two trends are in reverse (Chart 1). Gold sales (blue) have been hitting lows while silver sales (red) are booming. This urges me to look at the ratio between gold and silver sales.

Apparently, for every ounce of gold sold, they sold 90 ounces of silver in 2014, which cannot last forever (Chart 2). This is because annual silver supply is 1 billion ounces and gold supply is 130 million ounces. This is a ratio of 1 billion / 130 million = 8. So there is only 8 times as much silver available as compared to gold.

Chart 2: Ratio silver to gold ounces sold
So, how can it be that people are buying 90 times more ounces of silver than ounces of gold? Supply and demand will eventually go to equilibrium. Which means either gold goes down or silver goes up in price.

This is why I still think silver is grossly undervalued to gold and that's why I will buy silver and silver mines, waiting for a surge in silver.

vrijdag 18 april 2014

Run on GLD Starting at Decade Low GOFO Rates

It is very odd that Shanghai demand is now receding.

Today the SGE withdrawals of gold fell again 16% from last week to only 21.4615 tonnes, see chart below courtesy of Koos Jansen: In gold we trust. So demand for gold in China is really dropping fast as premiums between China and London are still at zero, indicating that demand for gold from China is very unnaturally low.

However, the GLD ETF had something interesting to tell. The GLD physical stock finally started dropping hard since yesterday, while I had thought it would start increasing.

GOFO rates are now very negative historically hitting new lows. Maybe this tells us that GLD is finally having a run on gold due to supply tightness. Because China isn't buying, so who is actually taking delivery from GLD now? Maybe the retail investors themselves, demanding for the physical. I'm just guessing around, could also just be storage fee payments.

woensdag 16 april 2014

Capacity Utilization Points to Higher Inflation

Capacity utilization rate is a leading indicator for inflation. And the latest number is at 79.2, a new record high since the bottom of the crisis. If history is an indicator, we should see huge inflation rates in a year from now.

The chart below points to a year over year CPI rate of 5% in the coming future. And we're already half to that number as the latest consumer prices pointed to a 0.2% increase in prices in the month of March, or a 2.4% inflation rate per annum.

You can be sure that inflation is coming and you should prepare for that accordingly.

dinsdag 15 april 2014

GDP Growth Rate Vs. 10 Year U.S. Treasury Bond Yield

The 10 year treasury bond yield can be viewed as the fixed-income market’s assessment of current nominal GDP growth on a year to year basis.

So from the chart below: GDP growth (red) should correlate to the 10 year U.S. bond yield (blue).

By monitoring the 10 year U.S. bond yield, you should have a good view on U.S. nominal GDP growth.

Long Term GOFO Rate Hits New Low

If you really think that gold is going to crash, I need to point out one thing and that's the GOFO rate.

Recently, the 12 month GOFO rate has hit a new low we have never seen since 1989.

Let's zoom in to 2009-2014: We have a new solid low here.

So not only the short term GOFO rates (1 month to 3 months) are negative now, also the long term GOFO rates are hitting new lows. So there is a tremendous stress building in the gold market. Historically negative GOFO rates are bottoms in the gold price.

This makes me very bullish in gold at this moment. Because gold lease rates are now much higher than the interest rates/bond yields. This indicates to me that the bond market is about to collapse, bond yields will be going higher, because gold lease rates cannot be higher than the corresponding bond yields. Either bond yields will be going up, or gold has to go up. It's one of the two.

On another note, we see that the Federal Reserve tapering, is actually just talk. Because some entity is buying U.S. bonds via Belgium at a rate of 30-40 billion USD a month, which is exactly how much tapering we have had. The Federal Reserve is throwing sand in our eyes, don't be fooled. They are propping up the U.S. bond market, artificially lowering the bond yields below the gold lease rates.

U.S. debt held by Belgium (Billion USD)

maandag 14 april 2014

Gold/silver ratio topping out

One must wonder what is happening to silver. While gold is making new highs, silver is flat.

The gold/silver ratio is now 65, well above the historical ratio. The chart below does point to a high in the gold/silver ratio, so I like to buy silver instead of gold at this moment.

gold silver ratio

zaterdag 12 april 2014

Real Estate Prices in Eurozone Declining

Eurostat just released an update on the house prices in the Euro Area. I am actively following this to follow up on the Belgium housing market, which I think is in a bubble.

The latest release on housing prices can be found in this report.

The trend is obviously down since the crisis of 2008. So it is still not a good time to buy a house. Renting is a lot better. As a matter of fact, I just had a walk around my area with the dogs and I've seen so many homes for sale it's not funny anymore. Belgium is the least affordable country in the Eurozone to buy a house.

Looks like Belgium is down 1.1% quarter over quarter and I expect it will get worse.

vrijdag 11 april 2014

Palladium reaches new highs

As a follow-up on this post, palladium has made new highs today.

Japanese stock market breaks below support

As I predicted a month ago, the Japanese stock market has started to break down below support. Especially when they refrain from adding stimulus. We also know that the sales tax is hitting the Japanese consumer and that will worsen the downtrend.

donderdag 10 april 2014

China's Impact on the U.S. Markets

The latest data shows that China is slowing tremendously and this will have severe implications on global markets. I expect a lot of downside in the stock market and I will give a thorough reasoning on why this prediction will come to fruition.

First off, China's import and export market has trended down since 2010 and lately we see a huge slowdown in China's imports/exports. The possible reason behind this is because China is now winding down its commodity financing deals. I have pointed this out here. Basically, Chinese imports and exports of commodities were artificially kept up by this hot money coming into China. When all of this unwinds, we will see industrial commodities plunge and we are seeing it right now. Gold on the other hand will become a safe haven.

Read on here.

Bitcoin Crashes Under $400/Bitcoin

Bitcoin crashing through $400/Bitcoin. This level was exactly the point where the hype started, which means we have come under support levels. And yes, Bitcoin will crash to zero now.

Especially when the government says Bitcoin is an asset and you will be taxed on it, maybe even retroactively.

And China banned Bitcoin completely. Bye Bye cryptocurrency...

woensdag 9 april 2014

FOMC Meeting Minutes

The FOMC Meeting Minutes are out, you can find the release here.

What is most important to me is this:

Inflation continued to run below the Committee's 2 percent longer-run objective over the intermeeting period. A couple of participants expressed concern that inflation might not return to 2 percent in the next few years and suggested that a protracted period of inflation below 2 percent raised questions about whether the Committee was providing an appropriate degree of monetary accommodation.

Translated: "Maybe we should stop tapering."

Result: Gold, bonds, stocks up. U.S. dollar down.

zaterdag 5 april 2014

Another Banker Drama: ABN AMRO

You can't count them on your fingers anymore. Jan Peter Schmittmann (former CEO of ABN AMRO) has been found dead in his house along with his wife and daughter. The cause of death is suicide.

I think we need to chart the amount of dead bankers on a timeline, could be a correlation there. Apparently it started to get serious around February 2014, which was also the month where the stock market was the lowest in 2014.

vrijdag 4 april 2014

Stock Screener: Take Two: Kayne Anderson MLP Investment Co.

Remember my post on Silicon Motion Technology (SIMO)?

Sometimes, if I don't have any ideas anymore what to buy, I use the stock screener.

What you want to do is filter on 4 attributes: market cap, P/E, dividend yield and percentage change.

1) Market Cap: do not choose small companies as they are mostly fraudulent or don't have sustainable earnings. Don't choose big companies because these are not volatile enough to get fast profits from. I'd filter between 200 million and 4 billion.

2) P/E ratio: choose the companies with the lowest P/E ratio, these companies are dirt cheap while still having earnings. Cheap is below P/E of 5. But do not choose below P/E of 2 because those are mostly companies that are going bankrupt or have bad growth.

3) Dividend yield: always choose companies that have dividends, because these companies have real earnings and can prove they have sustainable earnings to reward investors. The higher the better of course, but don't push it above 7% as those companies probably don't have the money to pay out dividends on a regular basis. I'd go for companies with dividends between 3% and 7%.

4) Volatility: don't choose companies that are so volatile. Maximum year over year change should be between the 20% range.

And the winner is: Silicon Motion Technology. This company is based in Taiwan and in the semiconductor business. Has pretty good earnings, doesn't look fraudulent and has bullish articles supporting it. Deutsche Bank initiated it with a buy to $24/share. And the board has recently authorized a share repurchase of up to 10% of the company. Maybe a good idea to buy if you have too much money.

If you bought that stock, you would have a 15% return in 3 months and a nice dividend of 5% per annum. Track record: 1-0.

Now let's go to our next stock. We use the exact same parameters as above.

And the winner is: 

Kayne Anderson MLP Investment Co.

It has extremely high and consistently growing dividends of 7%, is at book value and has very good earnings. It is a natural gas investment company and as you know, the U.S. is very competitive against Russia in this space. Marc Faber is bullish oil so I guess this will be a great investment going forward.

Let's keep this stock screener thing going and see if this isn't the easiest way to make money!

Marc Faber Bullish on Gold and Oil Stocks

Marc Faber sees no value in U.S. stocks, is long emerging markets (especially Vietnam). He is bullish on gold/silver and oil stocks. He likes platinum and palladium.

Marc Faber's Predictions

Let's see if Marc Faber's predictions are coming true on his shorts:
Facebook, Veeva Systems, Netflix, Tesla, Twitter.

Facebook rolling over:

Veeva Systems crashing:

Netflix rolling over:

Testla is holding gains:

 Twitter, the worst stock ever:

I must say, Marc Faber is pretty much spot on on his call.

And remember:


Oh I forgot one, Bitcoin is also crashing...

dinsdag 1 april 2014

Correlation between GLD ETF and COMEX

This is why I think the gold price is bottoming out, we have additional evidence at the COMEX.

When gold started its decline in April 2013, the COMEX registered stock level kept dropping due to outflows. This event was building up stress in the gold market as the gold price dropped.

The same has happened with the GLD ETF. So this is very interesting, it means that the GLD ETF and the COMEX gold stocks are correlated, which I didn't even notice up until now.

Since January 2014 both the COMEX and the GLD ETF bottomed out and started taking in physical gold stock. This made the price of gold go up more than 10% to date. You can see on the first chart that the registered gold stock at the COMEX is even increasing as we speak. This is a bullish indicator as this means that the GLD ETF gold stock level will increase too (if my correlation theory is correct). And everyone knows that when GLD takes in physical gold, that this is real physical demand pushing prices upwards.

Leverage has come down significantly due to the increase in registered gold at the COMEX. A further deleveraging should be bullish for gold.

By the way, gold should be much higher tomorrow as we start the new quarter. They tried to push the gold price down and stocks higher at the end of this quarter to make their books look good.