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enviro111
28 Comments
Gold Bugs Beware
However, here are few things I think I know...
1. The US and World economies are going to decline in real terms over the next FIVE years. This might happen fast (two years) or slower (5 to 10 years). The US economy needs to be completely restructured away from speculation, consumption, government and services and back into manufacturing, mining and agriculture. This of course doesn't mean the former are going to disappear, but only shrink some.
2. If deflation strikes hard, the stock market will fall faster than gold. The dow jones / gold ratio used to be 40 to 1. Now it is about 12 to 1. It is on its way to 2 to 1 or less. Under this scenario the dow jones would fall to about 1000 - 1500. This is the 1929-1934 scenario. Under this scenario a prudent investor should sell all and wait in cash or safe bonds. What constitutes safe is a good question.
If inflation strikes hard (1970's style), both the market and gold will likely increase. The market only marginally, but gold will skyrocket - $10,000 / oz.
If hyperinflation occurs (unlikely) ... we are all toast anyway.
Under inflation cash and bonds lose value, stocks are mostly stagnant.
3. Bottom Line - In five years I expect to be able to purchase up to 10 times as many shares of companies than I can now. These companies will be of higher quality than the current ones. In order to survive the fire, balance sheets will have to be deleveraged and management focused on short and long term survival rather than pure enrichment of themselves.
Silver Production Falls by 70%
Rather than produce an article with an unsubstantiated claim (apparently purposely false), why don't you spend the time actually researching the situation and make your best estimate of how much silver production is likely to decline as a result of base metal production drops?
Financially strong miners will close down the marginal mines. However, weak miner might not. The fixed costs may be huge and the variable costs might be small. Under those conditions the miner may 'have' to produce the commodity at or above cost for some time just to get the cash flow to pay fixed expenses. This kind of scenario makes it hard to make an accurate estimate of how much production will be shut in.
Canaccord Analyst: Distribution Cuts a Negative for Algonquin Power
During tight markets debt financing is virtually unavailable and a $2/share stock can't make any acquiestions. GROWTH - what a crock!! Who buys a utility for growth in this market - get real!!!
In fact, they should have just cut the dividend by 50% instead of 75% This would have preserved the stock. Prior to the cut it was trading at a 22% yield instead of the normal 12-15%. The market was expecting a cut, not a beheading.
Also, management is rewarding itself with big compensation packages while the ordinary investor is cleaned out. Once this stock gets back breakeven point (I bought at $4/share last week), I will be gone and never return. Crooks I do not need. Also, can you say lawsuits?
Management should have put the word out about their plan and made this a more orderly process. The extremly high distribution should have been cut back gradually long ago.
This business is really all about water - water flowing over a rock to make electricity and water purification. They also own a few windmills and a cogeneration facility. All the power is sold into long term contracts. This is a business as sharpe teenager could run. Yet this management screwed it all up. Stock has fallen from $10/share to $2.50 over a few years. What a bunch of dopes!
The only group which is worse is the Canadian government which killed the trust format a year or so ago. A bunch of greedy buggers! They killed their little golden goose because they needed a little more tax income. In the process the capital losses will be over $100 billion on these trusts and growing. I hope Harper and Flatherty (Flatulence) are happy.
Was 'Peak Oil' a Multi-Billion Dollar Hoax?
1. The head of the Saudi Aramco should know what he is talking about and at some level I'm sure he does. However, public statements must be taken with a grain of salt. If the public in Saudi Arabia ever finds out that the kingdom really doesn't have 100 years of reserves, it will be Aramco and the king's head on a platter. Saudi Arabia gets 2/3 of its oil from one oil field "Ghawar" and it is over 60 years old. Elephant oil fields live about as long as people and this one is a senior citizen! The Kingdom doesn't have any other fields that can take place of this one.
2. Peak oil doesn't mean that there will be NO more oil after a certain date. It merely means that production will peak and will slowly decline. At the top this is a slow process with decline of 1 or 2 percent overall. It is hard to clearly see these small declines and most people will 'miss' Peak Oil. It will only be visible in a 'rear view' mirror.
3. Peak Oil doesn't mean that oil prices will always rise forever and ever. Economic variables will play a role too. Peak oil does not repeal the law of supply and demand (many of the left leaning, socialistic commentators like to ignore supply and demand). Demand destruction due to a severe recession will cause the price of oil to decline (temporarily).
4. At some level Peak Oil will produce Peak Oil prices. At this level of production and this time, $140/bbl was the peak price. In the future, it might be higher or lower.
A Canadian Power Fund Could Be a Great Place to Hide
Algonquin also seems solid and is diversifed across segments. It is more dependent on water flows in the Canada, but unless there is a drought worrying about this is silly. Its yield is 20%+ right now. These two seem like solid buys without too much worry of distribution cuts. I think Algonquin also got bogged down in their attempted takeover of Clean Power Income trust.
Great Lakes Hydro is the premier company in the hydro business. The negative here is the low yield.
Boralex is weak sister who is NOT covering their distribution. In fact, they had to cut it about a year ago. I would avoid it.
Gold ETF Adds 36.5 Tonnes to Inventory On Rise in Demand
Note this is only for gold. Silver does not have huge central bank supplies and despite the low prices is really in short supply.
Oil Inventories
Worldwide oil production is falling - mexico, north sea, USA, even Russia. The middle east is reducing its exports and using more oil at home.
Demand has fallen only a little bit.
Supply will continue to fall through the fall and winter and surprize all the 'experts'.
right now the oil price is falling - not from fundamentals or even the 'dollar', but because funds are liquidating due to margin calls and over leverage. Once this overhang is gone, oil will be off to the races again.
iShares Silver Trust: Inventory Climbs as Metal Price Plunges
It's all about leverage, momentum trading and paper.
1. Futures contracts and comex are highly leverage products. SLV requires hard cash. A 50% fall in a leveraged product is DEADLY to everyone who holds it. A 50% fall in a fully paid position is an "inconvenience&qu... unless you need the money for something else right now. There is NO conspiracy here. Just heavy leverage in the silver futures that needs to be worked off.
2. Momentum Trading. Piling on and Piling out is the way the speculators work in futures trading. With apologies to Keynes "Everyone is a Turtle Trader now". Selling begets more selling. It ends when it doesn't work anymore. The momentum boys are not in the SLV trust - no leverage.
3. Paper silver can be created and destroyed at will. SLV cannot be 'grown' quickly or at a trader's whim. Also, if a government agent wants to manipulate the silver price they will not attack the SLV trust. They would have to buy it first.
$300/Barrel Oil Is Coming - Barron's Interview
$300/bbl oil is quite possible and likely before 2015. Here are two good reasons.
1. Supply -- production is falling in Mexico, USA, Europe and Most of the Middle East. Increases from Brazil, Africa and polar regions are not enough to offset the losses. Russia is a wild card, but it is likely that their production is also falling. No amount of drilling can reverse geologically determined depletion. Who cares if you can get production from a stripper well from 10 to 20 barrels per day. The world needs 85,000,000 barrels per day!!
Also, don't count on Windmills and solar to save you. They don't produce a liquid fuel. Massive penetration of electric vehicles is required first. This will take at least a decade to accomplish.
Finally, natural gas in North America is neither plentiful nor available for transportation fuel. The nat gas producers routinely drill wells that deplete 20% per year or more. North America is on a furious treadmill to keep the gas flowing. Forget about LNG either. There are only a few terminals to handle the stuff and NIMBY is blocking the construction of new ones.
2. Demand -- Despite $4.00/gal gasoline, demand is still rising in Asia and the Middle East. In fact, prices are quite low in the Middle East so demand will continue to explode! The Saudi's are going to supply their own market first! Worry about the USA secord or maybe even third.
Even in America demand has only weakened from 22,000,000 bbls per day to about 21,000,000 bbls per day. This is in spite of $4.00gal gasoline. It will take $8.00/gal or $300/bbl to really knock out the demand.
10 Financial Entities On the Brink
Thanks for the insight into some of these financial black holes. Some or all of them may fail in the future - who knows?
The key point is: this type of commentary and information - if you read the links should keep the uniformed investor (most of the commentators on this story) from bottom fishing in these dangerous waters.
If the poster here this this is all bull ... then fine. Buy these little gems now! See what happens.
The FED may come and bail you out and destroy the dollar in the process. However, the sensible thing might be is to let some of them fail. Corporate recklessness like this should not be rewarded with bailouts.
The Real Story of Precious Metals' Returns
A 15 year time frame is appropriate.
Obviously, gold and silver are not always going to outperform. No asset type can 'always' out perform. If you want to outperform you MUST do some sort of trading - probably infrequently.
Also, gold and silver are really 'money' not investments. Their only competitors are physical cash in terms of bank notes. How many of these to you keep stashed away? Most people have some, but not too much. If you are going to keep money for a rainy day, then it should not be all banknotes. Neither gold nor banknotes pay interest, but Gold is much safer.
For those who like to compare back 100 or 200 years. Show me a basket of stocks which existed back then that are still around and never went bankrupt during the period. Very, very few survived. The chance of your ancestor picking one is extremely remote.
However, if they picked gold, it would still be worth something.
The chance of a major company that exists today or even the US dollar for that matter surviving for another 100 or 200 years is remote. However, gold will still be worth something in 500 years.
No. 1 U.S. Export Is: Wealth
The primary reason is LOW fuel prices. In the future, people will be shocked at how low gasoline cost from 1950 - 2005, and how Americans just wasted it.
Now it is Saudi Arabia's chance to waste it. Why not, it belongs to them. It looks like they are doing a good job of it, too.
Is the Commodities Bull Market Over?
A Look at the Gold and Silver ETFs (Part I)
My physical gold holdings cannot generate income. I view these as extremely long term asset holdings - maybe the rest of my life??
I find once I have bought physical gold or silver, I find it is very difficult to sell it (there are very few coin dealers anymore). One must keep it long term just for convenience. The GLD ETF can be bought or sold regularly and conveniently.
The real issue with gold ownership isn't storage (media likes to dwell on this and make it sound like a big, big deal - It isn't for most people).
The media also likes to make it sound like gold is too volatile for most people - this is more bunk too. Based on long term standard deviations of price action, it is less volatile than most stocks.
The media also likes to make it sound like gold transactions have huge spreads and commissions. Compared with most stocks this is certainly true. However, compared with other forms of tangible assets (real estate, art, collectibles, etc.) the spreads and the buy/sell convenience are quite low.
In Light of Peak Oil, Financial Diversification Is a Bad Idea
Peak oil is a reality. However, I question putting huge amounts of money into the oil majors. These are dinosaurs who can't possibility replace their reserves. An oil company without reserves is dead. The stocks will be dead (lag the price of oil) for a long time to come. It seems the only group that wants to own for Exxon stock is Exxon!