Adrian Day, one of the world’s top money managers, speaks with Cambridge House Live anchor Vanessa Collette at the Sprott Natural Resource Symposium in Vancouver. Topics covered include the current state of the US economy (shocking info here!), where he believes the US Dollar is going (down!), and why gold is set to pop over the long-term. Shocking yet need-to-know info here for all concerned Americans.
Predicting the Unpredictable
As the markets awoke at the beginning of the week to news of a US air strike on Iraq, one aspect of the risk off trade that had been ensuing became clearer. Those who had been selling equities from the week earlier were doing so because of events in Russia, and definitely not what was leading up to US action in the Middle East. Without a doubt if events were to intensify or the degree of US involvement were to increase in the region, that might lead to a different story, but oil prices trading at a thirteen month low is one other example of how financial markets are exhibiting a lack of concern over the region.
As the attention of investors has clearly been with equities, the key question to how a broader set of sanctions impact the Russia economy is what now, if any effect will they have on companies with economic or financial ties to Russia. Furthermore, what impact would broadening sanctions do to the global economy? Sanctions now go beyond targeting specific individuals or their firms and encompass entire sectors. As Mohammad El-Erian points out in the Financial Times, this has direct implications to both supply chains and costs companies face, and then of course impacts to consumer demand.
Another threat is that if either country continues to strengthen their sanctions. Although motivation is to put pressure on Vladimir Putin, the sanctions ultimately only punish the Russian citizenry. Furthermore, it gives Putin the out that any hardship is the result of imposed disruptions by the West, and thus allows him to utilize the West as the scapegoat. As the Western European economies are the ones with much stronger economic ties to Russia, it’s the leadership of German Chancellor Angela Merkel and company that have a much larger dog in the fight, and thus need to be where a solution is fostered. It has long been clear that the US has given up their role as the global policeman and looks to play a limiting role in how this plays out.
The politics can be disguised in the near term to mask the real damage being done to the Russia economy. This might not last for much longer. The EU accompanied by the US and other smaller western nations have now sanctioned much of Russia’s financial system by limiting their banks access to parts of western capital markets. This hurts every single foreign investor with capital in Russia. And we can yet again introduce another risk, as their financial sector remains burdened with external debt close to half their foreign exchange reserves.
Since the end of June the Ruble has declined close to 7 per cent against the dollar, and measuring since right before Russia annexed Crimea, their central bank has had to raise interest rates from 5.5 per cent to 8 per cent in order to slow the rate at which capital attempts to flee the country. A diminishing ruble weakens the Russian economy. And to further exacerbate the weakening ruble, Russia’s ban on EU food imports only further weakens the currency as Russian consumers face an enforced inflationary environment paying higher food prices.
Russia’s growth in the last two and a half decades was a result of their economy opening up to the rest of the world and removing the centrally planned level of government. The steps Russia is taking are reminiscent of times past and the Cold War era. The potential for greater geopolitical risk that could result from tensions escalating is one important factor that is maintaining the bid in the gold market. The proven unpredictability of Vladimir Putin seems to suggest that gold is acting as the appropriate hedge.
View the original article here.
Brent Cook, one of the world’s top geos and the brains behind Exploration Insights, chats with Cambridge House Live anchor Vanessa Collette at the Sprott Natural Resource Symposium in Vancouver. They discuss the currents state of the junior mining sector and some of the companies he’s paying attention to right now.
Rick Rule, Chairman and Founder of Sprott Global Resource Investments, discusses the prospects of a dramatic recovery in the resource sector, why this junior resource bear market has been so prolonged, as well as some of the warning signs speculators should be aware of before buying these types of stocks.
Peter Spina, the entrepreneurial leader behind GoldSeek.com and SilverSeek.com, chats with Vanessa Collette at the Sprott Natural Resource Symposium in Vancouver. They discuss several pressing issues: Russia’s ongoing dispute with The West, where values can be found in the stock market and the newest place to buy gold bullion (www.GoldSeekMint.com!). Definitely tune in for this barn burner!
Doug Casey, NY Times’ best-selling author and chairman of Casey Research, chats with Cambridge House Live anchor Vanessa Collette at the Sprott Natural Resource Symposium. They discuss Casey’s documentary film, Meltdown America; why he believes the US is in such serious trouble; and where he sees value in the stock market.
Filmed At the Sprott Natural Resource Symposium July 23rd
A Goldilocks Moment
Who would of figured that in a week when the US economy reported initial estimates of second quarter GDP growth of 4 per cent, that the Dow Jones Industrial Average would simultaneously erase its gains for the year. Investors are grappling with the notion of whether this economy is ready to break out or revert back to the moderate 2 per cent growth levels we’ve witnessed on average since escaping recession. Similar to the jobs report early Friday morning, gains were strong despite missing expectations, but it’s the troubling 2 per cent wage growth barely matching inflation that leads investors to pause and question the economic outlook, particularly as viewed from the lens of the US Federal Reserve, and what corresponding policy could potentially be.
The headline print for US GDP growth is certainly one that appears strong on paper. No question following a dismal start to the year that the three month period ending in June made up for some of the weakness from the winter freeze. But it was the fact that consumption, which attributes for approximately seven tenths of the US economy’s output only advanced at two and a half per cent. This is what leads to questions or uncertainty surrounding whether growth in inventory building by US businesses will be matched by a pickup from the American consumer, or whether the expenditure is simply a trade-off for business spending later in the year. Currently, it seems the latter, that the economy will simply revert back to trend, that seems to resonate with investors as the equity markets seem exhausted at current levels.
Friday’s job numbers added credence to this theme as the number of jobs created no longer seems to be the focal point of the Federal Reserve. As renowned PIMCO economist Paul McCulley suggests, we know longer have a US federal reserve that is satisfied with just lowering the jobless rate. The Fed, under Janet Yellen is making clear their mandate that wage growth and other structural problems in the labour market is of particular importance. So while the broader theme around the US market is strength in full time employment on a monthly basis and encouraged workers rejoining the workforce, the issue and focus for the Fed stays with the measure of long term unemployed, which did tick higher in July, and the need for an increase in wage growth to keep pace with inflation and productivity gains.
This cautiously strong economic environment is congruent with the fashion in which the US dollar is trading. Wednesday of this week, the US dollar index rose to a 10 month high following the GDP numbers, and the way in which the dollar gained fits with this goldilocks economy-not too hot, and not too cold. We are seeing resounding strength in the dollar and the potential for upside, but still the uncertainties of the Fed ending QE, shifting consensus on when the Fed will be able to raise the Federal Funds Rate, and even whether the weakness in the euro will follow through.
The puzzle for the markets in a week when the Dow lost close to 400 points (2.40%) and the S&P close to 50 points (2.46%) was that there was no clear safe haven. Gold floundered, government bonds found modest bids, and the US dollar, albeit, gathering some momentum, stayed relatively quiet. As the markets and the economy recouple into a period of perhaps more normalcy, the question becomes is the inevitable equity correction looming, or is this another buy the dip as markets climb at a not too hot, but not too cold pace.
Jeff Evans, Executive Director of Quantitative Strategy at CIBC World Markets, describes his firm’s scientific, process-driven approach to identifying investment opportunities and mentions why he’s bullish on Canadian equities and Canadian small caps. He also explains why he is focusing on one particular area of the resource sector and reveals seven stocks that he thinks will outperform.
Jeff Clark, one of the world’s top gold experts and the Senior Precious Metals Analyst at Casey Research, chats with Cambridge House Live anchor Vanessa Collette at the Sprott Natural Resource Symposium in Vancouver about where the gold price will go should the mainstream markets have a major correction, why inflation is absolutely on its way and how he chooses what gold stocks to buy. You couldn’t watch a better interview today on gold and why you need it in your portfolio.
Sprott USA Chairman Rick Rule chats with Cambridge House Live anchor Vanessa Collette about a range of issues to investors, including great buys in the resource sector right now (uranium), “serially successful” miners he follows (Robert Friedland & the Lundin family), and how he evaluates companies (people, people, people!). Excellent advice for any serious investor.
Frank Holmes, CEO & Chief Investment Officer of US Global Investors, chats with Cambridge House Live anchor Vanessa Collette at the Sprott Natural Resources Symposium 2014 in Vancouver. They discuss a myriad of pertinent market events, including the “remarkable” value of junior miners & oil stocks.
Economic Patriotism or Free Market Pragmatism
The Obama administration is becoming quite critical of US corporations acquiring foreign firms in order to relocate their tax domicile to a country with a more favorable regime. Last week, US Treasury Secretary Jack Lew suggested American companies that have done so or are thinking about doing this lack a sense of economic patriotism. In his opinion, American corporations should not take advantage of the benefits of doing business in the United States and utilize loopholes in the US system in order to write down their tax liabilities. The President joined the chorus this week suggesting “some people are calling these companies corporate deserters.”
They’re both wrong.
US corporations are abiding by the current tax legislation that is in place. It’s simplistic and absurd to suggest they have a patriotic responsibility towards the United States. In fact, management of these corporations do have a responsibility, and that is after considering their stakeholders like their employees, suppliers, and customers, they are responsible to their shareholders. Thus, one would imagine US lawmakers would need to ensure that the United States is a competitive nation in terms of offering a favorable corporate tax rate that provides US business with the right incentives, but not put the onus on them to do ‘what’s right for America.’
For this, there is no question broad based corporate tax reform is desperately needed. It is evident from the fact that an additional 25 major US companies are considering relocating overseas by the end of this year in order to take advantage of a smaller tax bill. Senate Democrats have proposed raising the foreign ownership threshold required of a US company to re-domicile their tax base from 20 per cent to 50 per cent. Despite being backed by the current administration, this is not the solution. It is simply a Band-Aid fix, and one might even suggest that if such a significant tax advantage still exists, US corporations would flee more capital from the United States to acquire larger shares of foreign companies.
As The Economist points out, there are two major flaws with America’s tax code. First, on paper America’s corporate tax rate is 35%, which is the highest amongst the 34 member countries in the OECD, but their effective tax rate is less than the OECD average thanks to a laundry list of aimless loopholes. This alone illustrates the complexities and resulting inefficiencies in their tax code. The second is that the US taxes income regardless in which country it is earned, but doesn’t collect until funds are brought back to the US. This creates yet another disincentive to repatriate foreign profits and the consequence is less investment in the US.
If the US government wants better corporate participation at home, then it behooves them to rewrite the tax code. Ultimately, this is what will incentivize these same US companies that hold profits overseas to bring those profits home and lead to the positive contributions to the American domestic economy.
The original article can be viewed here.
Ubika Research Senior Gold Analyst Vikas Ranjan offers some insight into why the precious metal’s value has risen more than 7% during the past month, and whether investors will ‘Sell in May and go away’ this year. He also describes what he looks for in a gold company and mentions three stocks he likes at this time, including a past pick that surged 30% in a little over a month.