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federal reserve

Mike's Presentation to the NY Chapter of the SME: "The Revival of Natural Resources - Inflation or Deflation

Chris Berry2 Comments

Recently Mike delivered a presentation to the New York Chapter of the SME which takes a renewed look at the inflation/deflation debate and its effects on natural resources. He tackles topics such as negative interest rates, "helicopter drops", Central Banker potential to reignite growth, currency implications, some preferred commodities, and most importantly the verdict which calls for deflationary forces to predominate before inflation, again, rears its ugly head. 

In either event, gold and silver should benefit from the forthcoming extraordinary central banking programs to stimulate escape velocity growth and hit the Feds long sought inflation target. He argues that diversification into gold and silver exposure is an appropriate risk management investment policy. 

 

Click here for a copy. 

Negative Interest Rates: A Primer

Chris Berry1 Comment

By Chris Berry (@cberry1)

For a PDF copy of this note, please click here

 

It is widely acknowledged that credit is the lifeblood of an economy. It provides the leverage for growth. The interest rate assigned to a fixed income security can then be thought of as the “cost” or “price” of the credit.

This makes sense as lenders want to ensure their assets (cash, typically) earn a return above the risk free rate. To be clear, there is much more to determining an interest rate, but this is the basic premise.

What happens, though, when that rate goes negative?

This note is a primer on negative interest rates, a phenomenon not unheard of, but increasingly en vogue in the wake of the Bank of Japan’s surprising (or maybe not so surprising) announcement to set the interest rate they charge commercial banks to deposit money at the BoJ at -0.1%.

The Revival of Natural Resources: How Did We Get Here? When Will We Escape the Downturn?

Chris BerryComment

 

Mike recently presented the attached paper (here) at the Association of Quebec Mineral Exploration (AEMQ) Conference in Montreal. In it, he looks more closely at where we are in this bear market for resources and more importantly, why we're here. Finally, he looks at some possible solutions and time frames for recovery.  

We are gearing up for two trips to Europe in November (Munich, Geneva, Zurich, and Frankfurt) and December (London) and will be back shortly with details.

We've Seen This Before

Chris BerryComment

By Mike Berry

 

For a PDF copy of this note, please click here.

                                  

 Bob Farrell’s Rule #9: When all of the experts and forecasters agree – something else is going to happen.

I have been through two previous oil swoons.  In March 1999 oil bottomed at $10 per barrel.  I was invested - a money manager with Heartland Advisers at the time.  The Economist magazine (March 6, 1999) forecast oil to move lower, perhaps $2.  It was a painful experience but oil never went lower. 

Mike Berry Interview with Jay Taylor on the Inflation/Deflation Debate

Chris BerryComment

Here is a link to an interview Mike just did with Jay Taylor. Jay pens the popular newsletter Jay Taylor's Gold & Technology Stocks and also runs a weekly radio show titled Turning Hard Times Into Good Times. You can find out more about him here

There is a lot of information packed in a short interview here and it is well worth your time. Topics include the direction for the Federal Reserve in the wake of the end of quantitative easing, economic metrics to watch,  the currency "race to the bottom", banks manipulating metals prices, gold and silver supply and demand, interest rate volatility, and just how long the current economic climate may last. 

On a more serious note, we'd like to say Happy Thanksgiving to our American readers and thank you to all our readers for your time. Give your family a hug and enjoy the next few days.

Consolidation Amongst Miners Picks Up As Growth Slows

Chris BerryComment

By Chris Berry

 

 

It’s interesting to note that on the same day the International Monetary Fund released their annual World Economic Outlook which lowered expectations for global growth (yet again), that several potentially large mining deals were either launched or mooted.

While the talk of the potential deal for a merger between Glencore (GLEN:LN) and Rio Tinto (RIO:LN, RIO:NYSE) dominated the headlines, two (relatively) smaller deals were also announced recently.

Anglo American (AAL:LN) will reportedly commence with a sale of up to $1 billion worth of copper assets in Chile including the Mantos Blancos and Mantoverde mines, along with AAL’s 50.1 percent stakes in the El Soldado mine and Chagres smelter according to Bloomberg. These assets are small relative to others in AAL’s portfolio, but a willingness to part with them says a great deal about the company’s thoughts on the need to generate returns in the current macroeconomic environment.

On Labor Day 2014 Beware, Equity Investor - The More Things Change...

Chris Berry2 Comments

In July 2008, then Treasury Secretary Henry Paulson touched off the greatest banking crisis of our generation stretching back to the 1930’s.   On Sunday, July 20th 2008 before the markets opened in Asia, the Treasury Secretary of the United States stepped in to guarantee the US bond portfolio owned by China.  Earlier that same day he had commented on national TV, 

“I think it's going to be months that we're working our way through this period, clearly months. Of course the list [of difficulties] is going to grow longer given the stresses we have in the marketplace, given the housing correction - but again, it's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”

We have now spent 72 months - or 6 years - in the economic malaise that followed the US housing bubble’s implosion. 

2014 Q2 Economic and Energy Metals Review & Second Half Outlook – Part I

Chris Berry

By Chris Berry
 

  • During the second quarter of 2014, many share prices of energy metals companies struggled for direction after the dust settled from the Tesla (TSLA: NYSE) Gigafactory announcement.                                                     

  • Our theme of viewing the supply and demand dynamics of each energy metal individually continues to be the best course of action as the trajectories of each metal may differ. For example, lithium carbonate prices remained healthy while uranium prices fell by 8% in Q2 and are down 21% YTD.                                   

  • The recent precious metals price spike did not transfer over into the industrial or base metals sector.

  • Though economic data continues to improve selectively, there are still too many economic headwinds in place. Therefore only those resource investments that demonstrate the ability to produce at lowest-cost quartile costs or those that have a disruptive competitive advantage should be considered at this time.          

  • Despite nascent inflationary pressures, we are still inclined to believe that deflation (or disinflation) is the predominant threat to growth. The recent US Q1 GDP print of a 2.9% decline has many concerned that this was due to more than “the weather”.                   

  • We think that the second half of 2014 will be just as challenging as the first half for reasons we outline below.

 

Different Quarter, Different Catalysts

When Elon Musk announced plans to build a Gigafactory in the Western US (and has since discussed building multiple facilities), this sent select energy metals share prices into the stratosphere. Many believed this was the “turn.” The dust has since settled.....