Fed to keep interest rate near zero for 2 years

WASHINGTON (AP) -- The Federal Reserve said Tuesday that it will likely keep interest rates at record lows for the next two years after acknowledging that the economy is weaker than it had thought and faces increasing risks.

The Fed announced that it expects to keep its key interest rate near zero through mid-2013. It has been at that record low since December 2008. The Fed had previously only said that it would keep it low for "an extended period."

Fed policymakers used significantly more downbeat language to describe current economic conditions. It said so far this year the economy has grown "considerably slower" than the Fed had expected. They also said that temporary factors, such as high energy prices and the Japan crisis, only accounted for "some of the recent weakness" in economic activity.

The more explicit time frame is aimed at calming nervous investors. It offered them a clearer picture of how long they will be able to obtain ultra-cheap credit, and was at least a year longer than many economists had expected.

But it didn't seem to help on Tuesday. Stocks initially fell after the statement was released, possibly reflecting disappointment that the Fed did not announce another round of bond buying.

Fed officials met against a backdrop of speculation that they would say or do something new to address a darkening economic picture. The stock market has plunged and government data have signaled a weaker economy in the four weeks since Chairman Ben Bernanke told Congress that the Fed was ready to act if conditions worsened.

The economy grew at an annual rate of just 0.8 percent in the first six months of the year. Consumers have cut spending for the first time in 20 months. Wages are barely rising. Manufacturing is growing only slightly. And service companies are expanding at the slowest pace in 17 months.

Employers hired more in July than during the previous two months. But the number of jobs added was far fewer than needed to significantly dent the unemployment rate, now at 9.1 percent. The rate has exceeded 9 percent in all but two months since the recession officially ended in June 2009.

Fear that another recession is unavoidable, along with worries that Europe may be unable to contain its debt crisis, has rattled stock markets. The Dow Jones industrial average has lost nearly 15 percent of its value since July 21. On Monday, it fell 634 points - its worst day since 2008 and sixth-worst drop in history.

The tailspin on Wall Street was further fueled by Standard & Poor's decision to downgrade long-term U.S. debt.

Bernanke didn't speak publicly after Tuesday's Fed meeting. The chairman this year made a historic change by scheduling news conferences after four of the Fed's eight policy meetings each year, but Tuesday's wasn't one of them.

Later this month at the Fed's annual retreat in Jackson Hole, Wyo., Bernanke will likely address the weakening economy, the S&P downgrade and the market turmoil.

Earlier this summer, the Fed ended a $600 billion Treasury bond-buying program. The bond purchases were intended to keep rates low to encourage spending and borrowing and lift stock prices.

How to brace your portfolio for another recession

SAN FRANCISCO (MarketWatch) — The risk of another recession in the U.S. is growing and investors need to adjust their portfolio holdings accordingly.

The downgrade of U.S. Treasury debt late Friday only underscores the need to examine the investments you own, why you own them, and the risk you’re taking. The types and amount of domestic and international stocks in your portfolio, and your opinion of emerging markets, cash and U.S. government bonds — even the reason for owning gold — all need to be reassessed in order for your investments to thrive in a challenging, slow- or no-growth environment.
“At this point it’s only a question of whether [a recession] has already begun,” said David Rosenberg, chief economist and strategist at Toronto-based investment manager Gluskin Sheff.
Investors clearly believe they already know the answer, given the punishing selloff in stocks worldwide over the past week.
The waterfall-like plunge in equity markets on Thursday, the roller-coaster trading on Friday and the sharp rally in safe-haven Treasurys suggests that investors are locking into a defensive posture they may be reluctant to give up easily

And now that debt-ratings firm Standard & Poor’s has stripped the U.S. of its triple-A rating for the first time, dropping it a notch to AA+ out of concern over the U.S. political process, both stock and bond investors have yet another imperative to consider new ways to take advantage of less-forgiving market conditions. Read more: U.S. debt rating cut by S&P.

“We are not likely done with this correction, as the factors that triggered this selloff have yet to be addressed, let alone successfully resolved,” said Sam Stovall, chief investment strategist at Standard & Poor’s Equity Research, in a note to clients on Friday.
While another recession within 12 months is more likely — many observers now put the odds at about one-in-three — those who believe the economy will escape this mud-stained “soft patch” without a setback may ultimately be right. Read more: Investors to address debt downgrade, Fed moves.

Regardless, it’s clear that the investing playbook is changing. Here’s what you need to know to stay ahead in the game:

1. Review U.S. stocks

Stock investors realize the U.S. economy has been on a slow track, but until last month the overriding belief was that domestic growth would improve over time.

So when the Federal Reserve’s stimulus package known as QE2 stopped at the end of June, investors also knew the frail patient would still need help getting around. The hope was that a robust corporate sector would provide support with capital spending and job creation.

Then the picture darkened. The confidence-sapping debt-ceiling debate, Washington’s newfound austerity and economic data that cast doubt about the efficacy of QE2 has stoked fears that recession, not inflation, is the gravest threat to fragile U.S. and global markets.

“What we had was an artificial recovery propped up by deficit spending and monetary stimulus,” said Rob Arnott, founder of Research Affiliates, a Newport Beach, Calif.-based investment management firm.

“If the private sector failed to have its animal spirits invigorated by the fiscal and monetary stimulus, then the stimulus failed,” he added. “And that puts us back into a recession that never really ran its course.”

Such a backdrop isn’t conducive to either corporate or consumer spending. Accordingly, risk-averse investors are now focusing on the return of capital more than return on capital. Stock buyers are embracing traditional “recession-proof,” dividend-rich sectors such as utilities, health care and consumer staples. Read more: 5 money moves one recession believer is making now.

Within those sectors, look for companies that sport above-average dividend yields, are flush with cash, and sell goods and services that people need regardless of the economy. In the best cases, solid businesses can take advantage of weaker rivals to gain market share and emerge from a downturn even stronger.

“A focus on hybrids or income-equity portfolios that generate a yield far superior than what you can garner in the Treasury market makes perfect sense,” Gluskin-Sheff’s Rosenberg said in an email.

More sophisticated investors can maximize their return potential by reducing exposure to riskier assets such as small, aggressive growth stocks and adopting a bigger-is-better approach, Rosenberg added.

“Relative-value strategies that can go short low-quality and high-cyclical equities while going long a basket of high-quality and low-cyclical equities will be a money-maker in this environment,” he said.

2. Be wary of China and emerging markets

Stock investors can expect to see further pullbacks in emerging markets in the event of a U.S. recession.

“The emerging markets are very closely tied to the U.S, which remains the largest market in the world and therefore their largest consumer,” said Usha Haley, an expert on emerging markets and chaired professor of international business at Massey University in Auckland, New Zealand.

While developing economies aren’t so directly dependent on the U.S. as they used to be, their fortunes increasingly are linked to China — which is.

And if China’s growth cools in the wake of U.S. recession so will its huge appetite for commodities. That would hurt Brazil in particular. China has overtaken the U.S. as Brazil’s biggest trading partner, evolving into one of the largest purchasers of oil, natural gas, coal and minerals to fuel its expansion, Haley said.

“Markets that are tied to the U.S. as trade partners are the most vulnerable,” said Matt Lasov, practice leader of Frontier Strategy Group’s Quantitative Analytics.

Still, trade partners such as China and oil-exporting countries have built tremendous reserves that can be used as stimulus, Lasov said.

Trade partners such as Mexico may be at greater risk because of a lack of oil reserves, he said. And, he noted, “markets that rely strongly on domestic consumption for growth, including India, Poland, Turkey and Indonesia would be impacted least” by a U.S. recession.

3. Embrace Treasurys and corporate bonds

Treasurys already have attracted risk-adverse investors and remain the safe haven of choice, while riskier high-yield bonds, or junk bonds, are likely to see a drop in prices as in previous recessions, according to analysts and bond managers.

Meanwhile, investment-grade bonds, issued from companies with stronger underlying fundamentals and high ratings, will follow the trend in Treasurys. But yields won’t fall as much, increasing the gap between the two known as the “yield spread.”

“Yield spreads will widen if we get into a recession and Treasurys will continue to do well,” said Kathy Jones, fixed-income strategist at Charles Schwab.

Yet don’t ignore the fact that corporate balance sheets are generally in pristine shape, with less debt and positive cash flow.

“If there is anything out there that is remotely close to ‘recession proof‘ it is corporate balance sheets, and so an emphasis on credit is going to be critical,” said Gluskin Sheff’s Rosenberg. He suggests that income-seeking investors hunt for companies with single-A credit quality but sport a triple-B yield, now averaging about 5%.

Even so, many strategists are more bullish on Treasurys in an unforgiving economic climate.

“If your choice is among bonds, you want to buy Treasurys, because they have historically done the best in recessions,” said James Swanson, chief investment strategist at MFS Investment Management.

A bit of cash never hurts either, said investment strategist Barry Ritholtz, chief executive officer of FusionIQ and author of The Big Picture blog.

“When you’re in a secular bear market, which we are in, I think of investors’ jobs as managing risk and preserving capital,” Ritholtz said. With that in mind, about 50% of his recommended portfolio allocation is split evenly between cash and bonds, with the remainder spread across stocks and commodities.

4. Go for the gold

Gold has been a safe haven during at least the two most recent U.S. recessions. Between December 2007 and June 2009, which marked the longest recession since World War II, gold futures gained 18%. In the same period, the Dow Jones Industrial Average lost 37%.

During the recession of 2001, which lasted between March and November of that year, gold gained 3.3% while the Dow lost 5.7%.

“We are close to a ‘double dip’” recession, and gold is still the fear trade, said James Cordier, a portfolio manager at Optionsellers.com in Florida.

A recession would keep near-zero interest rates for longer in Europe and in the U.S. and bring currency devaluation, both key pillars of support for gold. The metal, seen as the ultimate store of value, would do well in a recessionary environment even as its price marches higher, Cordier said.

“A double-dip recession is more reason yet to buy gold,” he added. “Gold as a currency will become more and more popular.”

“Gold is in the process of getting re-established as a reserve asset for most central banks because it’s a natural hedge to their other reserve assets, mostly government bonds,” said Dan Amoss, editor of the Strategic Short Report, a newsletter dedicated to uncovering irregularities in financial reports. Read more: Central banks step up gold purchases.

“All central banks will be looking to increase their physical gold reserves in lockstep with the increasing sizes of their balance sheets,” Amoss added. “So should wealthy individuals. And institutional investors, as usual, will probably be last to buy gold at much higher levels.”

Beijing Has French Taste

PARIS—GDF Suez SA is close to a deal in which China Investment Corp. would take a stake in the energy company's exploration-and-production business, marking yet another investment by Beijing in Western energy assets and boosting the French company's exposure to the energy-hungry Asian market.

Under the proposed deal, the Chinese sovereign-wealth fund would take a 30% stake in the exploration-and-production business for as much as €3 billion ($4.28 billion), a person familiar with the matter said. GDF Suez could announce the deal, which its board has yet to approve and could still fall through, as early as Wednesday when the company reports earnings.
The agreement also lays the groundwork for CIC possibly to invest with GDF Suez in future operations, such as electricity generation, across the Asian-Pacific region except China, the person said. CIC is subject to limits on investing in Chinese assets. CIC also would help GDF Suez land contracts in China, the person said. CIC didn't respond to requests for comment.
The proposed deal is part of GDF Suez Chief Executive Gérard Mestrallet's plan to sell roughly €10 billion in assets by 2013 to reduce debt, focus on organic growth and boost the company's presence in the Asia Pacific region.
GDF Suez's exploration-and-production business, which focuses largely on natural gas, accounted for €1.59 billion, or 1.9%, of the company's revenue last year. The capital-intensive nature of locating and extracting oil and gas means that allying with a sovereign-wealth fund makes sense, analysts say, especially if the company is looking to lighten its debt load. GDF Suez has exploration and production activities in Australia and Indonesia but the majority of the business is located in Europe and North Africa.
CIC has been investing heavily in Western energy and resources since 2009 as a hedge against inflation and to meet the energy needs of the world's fastest-growing economy. In March of last year, the fund invested $1.6 billion for a 15% stake in AES Corp., a Virginia-based power company. A few months later, CIC invested $416 million in Calgary, Alberta, oil-sands company Penn West Energy Trust and $200 million in Oklahoma City's Chesapeake Energy Corp.
The Chinese $410 billion sovereign-wealth fund earned an 11.7% return on its overseas portfolio last year as it deployed almost all of its capital and accelerated investments into high-risk assets.
Chinese energy companies also have been investing, or trying to invest, in Western assets recently. Cnooc Ltd. last month agreed to spend $2.1 billion for bankrupt Canadian oil-sands developer OPTI Canada Inc. In June, PetroChina Co. and Canada's Encana Corp. called off a $5.5 billion partnership to develop a large tract of natural gas when they couldn't agree on terms.
Mr. Mestrallet has said the world is entering a "golden age" of natural gas, spurred in part by the discovery of large fields of shale gas and fears over the viability of nuclear energy after the Fukushima power-plant disaster in Japan. Global consumption of natural gas could rise by more than 50% over the next 25 years, according to the International Energy Agency.
China is a huge growth market for natural gas as the country's electricity needs soar and Beijing looks to reduce the use of high-polluting coal. But GDF Suez has been reluctant to invest in electricity production on its own in China, concerned over the lack of stable regulatory and investment environments.
GDF Suez, born of a 2008 merger between French utility giants Suez and Gaz de France, is looking to sell assets in the next two years in part to reduce debt from a $2.25 billion deal in February to merge international assets with the U.K's International Power PLC.
The planned deal with CIC was first reported Monday in French daily newspaper Les Echos.
GDF Suez shares closed at €19.82 ($28.30), down 59 European cents, on Monday in Paris amid sharp declines world-wide.

Cenovus profits more than triple

Planned maintenance work cut into production from Cenovus Energy's Foster Creek plant in northeast Alberta in the second quarter. (Canadian Press/Cenovus )

Oilsands operator Cenovus Energy Inc. reported its second-quarter profits more than tripled Tuesday, thanks to robust oil prices and strength in its refining operations.
But wet weather and wildfires throughout Western Canada this spring took a toll on the Calgary-based company's production during the quarter.
"Through these adverse conditions, our teams demonstrated resilience. We have continued to deliver on our oil growth plans," chief executive Brian Ferguson told a conference call with analysts.
Before markets opened, Cenovus said its net profits soared to $655 million, or 85 cents per share in the three months ended June 30.
That compared with $183 million, or 24 cents a year earlier. That beat the average analyst estimate of 44 cents per share, according to a survey by Thomson Reuters.
Revenues in the quarter jumped to $4 billion from $3.1 billion a year earlier. Cash flow jumped to $939 million from $537 million.
Production at the company's Foster Creek and Christina Lake oilsands projects in northern Alberta was more than 58,000 barrels per day, net to the company. That was slightly less than the same period a year earlier due to planned maintenance work.
"Our manufacturing approach to developing these oilsands assets has been instrumental in bringing on expansions at industry-leading capital efficiencies while controlling quality, cost and safety," Ferguson said.
"We expect that this formula will allow us to advance our development plans through the next decade."
He added Cenovus is well on its way to meeting its goal of producing 400,000 barrels per day from the oilsands by the end of 2021.
Cenovus 3-month chart
Cenovus is a relatively new name in the oilpatch, having split off from natural gas producer Encana Corp. in late 2009.
Shares in the company dropped 2.4 per cent, or 90 cents, to $37.02 in mid-day trading on the Toronto Stock Exchange.
In response to out-of-control forest fires in northern Alberta in May, Cenovus was forced to cut production from its Pelican Lake oil pool in northern Alberta. Production was curtailed for about two weeks, including one week with no output at all.
That site itself was never in peril, but a pipeline that carries crude from the region was out of commission as the fires knocked out its power supply.
Pelican Lake production is now back to its normal level of between 20,000 and 22,000 barrels of oil per day.
Flooding in Saskatchewan has also caused problems for Cenovus and its peers. At its Weyburn oilfield, production declined by 1,750 barrels per day. In the Lower Shaunavon and Bakken regions of the province, production was down about 3,100 barrels per day.
The company expects production will recover during the third quarter.
"We fully expect to meet our overall production guidance and exit- rate volume expectations for each of our operating areas," chief operating officer John Brannan told the conference call.
In June, the Calgary-based company announced it aims to produce about 500,000 barrels of oil per day by the end of the decade. The steep increase from its current daily output of around 135,000 barrels will be largely driven by a six-fold jump in oilsands production by the end of 2021

Ford, Chrysler take 2Q hit to position for growth

DEARBORN, Mich. (AP) — Ford's ambitious plans to grow in Asia took a toll on its second-quarter profit, with higher costs to design and sell cars offsetting rising sales.
The company's net income fell 8 percent to $2.4 billion for the April-June period. Ford blamed higher prices for steel and other commodities, but also said that after years of restructuring, the company is strong enough to spend heavily on future growth. Ford spent $400 million more on engineering and advertising new vehicles than it did a year earlier.
"That's the new thing for Ford, that we are investing in the future," Ford Chief Financial Officer Lewis Booth said.
Rival Chrysler Group also took a hit, reporting a loss of $370 million in the quarter. Like Ford, Chrysler said the loss was a sign of a healthier balance sheet. Without a $551 million accounting charge for refinancing bailout debts to the U.S. and Canadian governments, Chrysler would have earned $181 million.
Ford's worldwide sales were up 7 percent. Revenue rose 13 percent to $35.5 billion. But the company warned last month that its profit could slip, citing investments in future products.
Investment in Asia is the next step in President and CEO Alan Mulally's plan to move beyond the company's near collapse in 2006, when it took out $23 billion in loans to restructure. Since then, it has cut costs and sunk billions into improving Ford cars, resulting in nine straight quarterly profits. Now, the company aims to expand its business in Asia, where it's dwarfed by General Motors Co.
Ford plans to roll out 15 cars in India and China over the next four years, and as a result, it's spending hundreds of millions more on product development than it did a year ago. In Asia, Ford reported a pretax profit of just $1 million, down $112 million from the same time last year. The company also took a hit because some of its hottest cars are smaller and less profitable than its older models, like the $8,000 Figo in India. It hopes to make up for that by selling more cars.
An investment now could mean a windfall for Ford later. GM sells three times more cars in China than Ford does in all of Asia, and GM booked a $600 million profit in its international operations — which includes Asia — in the first quarter. Ford currently controls less than 3 percent of the market in both India and China, but wants to increase its sales by 50 percent by mid-decade.
Ford also said it is spending more on production to meet post-recession demand in the U.S., where people are expected to buy nearly 2 million more cars this year than they did last year. Ford projects that annual U.S. sales will be in the lower end of its 13 million to 13.5 million forecast. The company lowered its forecast for European sales, which were weakened by the debt crisis in the latest quarter. Ford now expects sales no higher than 15.3 million vehicles, down from 15.5 million.
One reason sales softened in the U.S. was a lack of discounts. Both Ford and Chrysler were able to command higher prices for their cars and trucks last quarter, partly because of tight supplies of Japanese cars following an earthquake in that nation.
Chrysler's average selling price rose nearly 5 percent from a year earlier to $29,964 while Ford's rose 1 percent to $31,179, according to Edmunds.com automotive website. Both spent less on rebates and other deals.
While Chrysler was focused on paying off its government loans, Ford paid $2.6 billion of its own debt during the quarter. The company now has $14 billion in debt, a legacy of its 2006 restructuring. Ford hopes its steady reduction in debt will convince ratings agencies to return the company to investment-grade status, which would make it cheaper to borrow money.
Ford may not have to wait long. Standard and Poor's Ratings Service said the company's "financial performance is tracking levels consistent with a higher rating," although it said it is waiting to act until Ford completes contract talks with the United Auto Workers union. Ford and the UAW are expected to kick off negotiations on a new four-year contract this Friday.
GM is scheduled to release its second-quarter earnings Aug. 4.
Ford shares fell 30 cents, or 2 percent, to $12.89 in afternoon trading.

RIM TO CUT 2000 JOBS WORLDWIDE

Research In Motion will slash about 2,000 jobs from its operations worldwide in an effort to cut costs, but the impact on employees at its Bedford office will be "relatively small," the company said Monday.

The BlackBerry maker announced the "cost optimization program" in a news release Monday, calling the layoffs a "prudent and necessary step for the long-term success of the company."

A spokesman said Monday in an email to The Chronicle Herald that "although RIM is looking to achieve efficiencies across its global operations, the impact of the workforce reduction announced today is relatively small in Halifax."

If employees at RIM’s customer support centre in Bedford had any inkling of impending job losses at their office, they were keeping mum Monday.

"Actually, I don’t know anything about it," one man said outside the Innovation Drive office.

A woman declined comment, saying, "It’s not worth the risk."

RIM said it would notify affected employees at its North American operations this week. The company, based in Waterloo, Ont., has about 19,000 employees worldwide.

Bedford councillor Tim Outhit said he isn’t privy to any of the company’s plans for layoffs in his community, but he expressed concern for the workers.

"Obviously, I’m hoping for the best for them. I like to see good-paying, knowledge economy jobs in Nova Scotia, and I was very pleased when RIM came here. They’re good-paying jobs, and we’d like to see them be here."

RIM’s arrival in Nova Scotia was announced with fanfare in November 2005. With the expected gain of hundreds of jobs in the area, the province pulled out all the stops to woo the company.

The former Office of Economic Development gave $5 million to RIM in 2005 to cover training and recruitment, and the provincial business development agency, Nova Scotia Business Inc., contributed an additional $5.3 million in payroll rebates. Under the rebate program, companies receive money each year after they meet predetermined hiring targets.

Neither RIM nor the business development agency would specify how many people the company now employs in Bedford, but Percy Paris, the minister of economic and rural development and tourism, said the number is about 540.

That is far below the estimated job growth touted in Nova Scotia Business Inc.’s 2005-06 annual report.

"The company already has more than 100 employees in place in Halifax and will continue to create one job every business day for the next five years," the report said.

Despite falling short of job estimates, the company has been a boon to the province, said Stephen Lund, the agency’s president and chief executive officer.

Name recognition alone has allowed Nova Scotia’s business jet-setters to market the province to potential clients overseas.

"This is a critical part of the IT sector," Lund said. "Having RIM has allowed us to leverage that name around the world. When we’re talking to companies in London, New York, China, it’s a great selling tool for us."

The province’s financial investment of $10.3 million has paid off, he said.

"This is a strong positive return on investment for us. If you take just the tax revenue alone that those employees would generate, it far exceeds what we paid out."

The dip in the company’s workforce comes as RIM squares off against fierce competition in the smartphone market, including Apple’s iPhone and phones with Google’s Android operating system. RIM’s BlackBerry PlayBook tablet has also received lukewarm reviews compared with Apple’s popular iPad.

Lund said RIM’s challenges are no reason to lose faith in the company.

"They’re still showing strong numbers; they’re just not meeting the numbers analysts have expected. Halifax has been a great operation. We have great confidence in the company."

After IPO, LinkedIn Value May Top $4 Billion

LinkedIn Corp., the largest professional-networking website, increased the price range for its initial public offering, lifting the company’s potential valuation to as much as $4.25 billion.
The company is offering 7.84 million shares at $42 to $45 each, according to a

At the new top end of the range, LinkedIn would raise $405.7 million,
 about 29 percent more than previously sought.

filing with the U.S. Securities and Exchange Commission today. The shares had been offered for $32 to $35 apiece. At the top end of the new range, Mountain View, California-based LinkedIn would raise $405.7 million if underwriters exercise an overallotment option to buy 1.18 million additional shares.
LinkedIn is the first major U.S. social-networking company to tap the public market for funding and may be the first in a wave of IPOs by other Internet companies. Groupon Inc., the deals website that rebuffed a $6 billion takeover approach from Google Inc., is considering a public offering. Facebook Inc. may pursue an IPO in 2012, three people familiar with the matter said last year.
Morgan Stanley (MS), Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) are leading the offering. The stock will trade under the symbol LNKD.
About 62 percent of the shares in the offering are being sold by LinkedIn, which said it plans to use the proceeds to fund existing operations and to expand the business, possibly including buying other companies or technologies.

LinkedIn Sellers

The sellers of the other shares include a venture capital affiliate of Bain Capital LLC, McGraw-Hill Cos., Goldman Sachs Group Inc. (GS) and founder and Chairman Reid Hoffman, the prospectus shows. Venture capital backers Sequoia Capital, Greylock Partners and Bessemer Venture Partners aren’t selling shares, according to the filing.
LinkedIn members use the site to search for jobs, recruit employees and find industry experts. While users can create personal profiles for free, the company introduced paid subscriptions in 2005, giving recruiters more access to job candidates and providing business professionals ways to communicate with one another. The company also makes money by selling ads on the site.
The new midpoint price of $43.50 would value LinkedIn at $4.11 billion, or about 11 times estimated sales of $376 million this year, if sales for the year continue at the $93.9 million rate of the first quarter.

The Silver rises more than 8 percent this week | Gold and Silver Blog

The Silver rises more than 8 percent this week Gold and Silver Blog

Mike Maloney on The Silver Sell-Off

Mike Maloney : as far as the sell-off goes I really http://www.youtube.com/watch?v=_-h_HtveI84&feature=player_embedded#at=270<iframe width="425" height="349" src="http://www.youtube.com/embed/_-h_HtveI84" frameborder="0" allowfullscreen></iframe>do not care , well actually I do I am hoping silver will go down a little bit more because I want to buy more , I want a lot more . silver has yet to exceed its 1980 High we came whthin a breath of it but it hasn't exceeded its 1980 high , can you name one thing on this planet that is still selling at a discount to its 1980 price !? ...
the dollar is on its death bed , the Euro is on the verge of break out , people do not realize that every 30 to 40 years the world has a new monetary system , the dollar is doomed , gold is going to go to infinity so is silver, measuring gold and silver in dollar is idiotic , gold is not anywhere near a bubble , silver is money just like gold , the dollar is a currency not money ....when gold and silver are in the run away it means that the death of the currency is right around the corner , the Hunt brothers were used as the sacrificial lamb to save the US Dollar , the precious metals always always win

Keiser Report guest Mike Maloney on gold and silver prices (10May11)

Speculators seen leading commodities crash

By Sarah Turner and Michael Kitchen, MarketWatch

SYDNEY (MarketWatch) — Analysts offered a wide variety of reasons for Thursday’s plunge in commodities, but some agreed the main force behind the drop might simply be a matter of stampeding speculators.

“It all began with silver, which started falling sharply late last week when CME Group increased margin requirements on trades,” said BMO Financial Group Chief Economist Sherry Cooper, in a note Thursday.

Indeed, the CME’s repeated hikes to the silver-margin requirements sent the metal, which as of April 29 had risen nearly 60% for the year, tumbling, with benchmark silver futures losing more than 25% since then.
But a variety of other news, including a Wall Street Journal report that billionaire financier George Soros was selling off his holdings, helped the losses snowball, and on Thursday, silver fell 8% on the Comex division of the New York Mercantile Exchange, its largest one-day percentage drop since Dec. 1, 2008.

This touched off massive selling across the commodities complex.

“Silver really just burnt off in a big way and that fed through to other commodities,” said Michael Turner, strategist at RBC Capital Markets.

Oil (NEW:CLM11) was especially hard hit by Thursday’s follow-on crash, dropping as low as $99.35 during the North American session, its heaviest drop in percentage terms since April 2009. Crude futures continued to decline on Friday and were recently off over 4%. Read more on oil’s Friday drop.

Turner says that the dollar’s rise after the European Central Bank failed to signal further near-term interest-rate hikes early Thursday helped turn silver’s drop into a stampede out of almost all commodities. Read more about the European Central Bank


Independent oil trader and author Dan Dicker agreed, saying crude’s reaction to the drop was “great proof of just how much speculative money there was in the oil market.”

Noting that much of the drop included a large volume of margin selling, he added that the fall also showed “just how much stupid money there is in the oil game.”

But despite the speculative nature of the drop, analysts at Lloyds Bank said Friday that some economic fundamentals actually point to even lower prices for some commodities.

“Many of them have looked frothy for a while and have perhaps accelerated beyond the pace justified by the global recovery,” they said in a research note.

But they also added that “some perspective is required,” citing the fact that the Thomson Reuters/Jefferies CRB Index, which tracks global commodities prices, is “actually marginally below the levels of five years ago, so it’s hard to argue that commodity prices are headed for a massive decline given that global [gross

Ten common mistakes people make when buying gold

Buying gold has long been touted as a terrific way to diversify your investment portfolio and protect yourself against downturns in global currency values and financial markets. At first glance, the process seems simple enough. You just find a couple of coins that look good, fork over your cash, and store your loot in a safe, right? Wrong. There's much more involved in gold investing than browsing through a coin catalog and picking out your favorites. Unfortunately a lot of people actually take that approach-and end up losing quite a bit of money while doing so.

But you shouldn't let the fear of making mistakes prevent you from taking steps to solidify your financial standing. All you have to do is be aware of potential pitfalls so you can avoid them when the time comes to buy. Here are 10 of the most common mistakes to look out for prior to purchasing this precious metal.

1. Lack of knowledge. There is no excuse for being uninformed. As long as you have access to the Internet, you should be able to find out all you need to know about the basic ins and outs of gold investing. You should start by reading a glossary of terms related to this activity before moving on to articles and other resources so you know exactly what the experts are talking about.

2. Misunderstanding the value of gold. This mistake goes hand in hand with lack of knowledge. In order to invest wisely, you must understand how the metal-especially in coin form-derives its value based on things like history, scarcity, rarity, indestructibility, and global recognition as a desired commodity.

3. Indecision about your investment amount. People who are new to buying gold frequently make the mistake of either ordering too much or too little of the metal. If you buy too much, it defeats the purpose of diversifying your portfolio. If you buy too little, you're not doing enough to protect your other assets. Most experts agree that your coin holdings should equal from 5 to 30 percent of the combined value of the stocks, bonds, and mutual funds in your portfolio.

4. Expecting big short-term gains. Gold investing is not going to make you rich overnight, so if you're interested in short-term gains, you should check out other options. The point of putting your money into investment grade coins is to hold onto them for a long time while they appreciate in value.

5. Linking gold markets to the stock market. Some would-be investors are under the mistaken impression that gold prices are somehow linked to the stock market, and that fluctuations in one will lead to corresponding reactions in the other. But it's important to understand that the two markets are largely independent of one another, so your purchasing decisions shouldn't be based on illusory cause-effect relationships.

6. Substituting gold stock or ETFs for the physical metal. Buying gold to protect your assets against unstable market conditions, inflation, and other economic problems is a smart move-but only if you get the metal itself instead of stocks, exchange traded funds, or other unworthy substitutes.

7. Skipping Rare Certified Gold in favor of bullion. Not all gold investments are created equal. Bullion, for example, will not appreciate in value based on age, rarity, or other variables. It will only be worth what the commodities market dictates. By contrast, Rare Certified Gold coins that are held for many years can end up being worth far more than what their weight would command on the commodities market, since their value is driven by supply and demand.

8. Looking for cheap prices. Although getting a bargain is usually considered a good thing, that's not necessarily the case when it comes to buying gold. Abnormally cheap prices are typically an indication of inferior quality, and are therefore a clear sign to stay away-unless you don't mind getting stuck with something that you won't be able to resell when you need cash.

9. Working with multiple dealers.Because of the large sums involved in gold investing, it would be worth the time and effort to seek out a reputable dealer and stick with that person for each transaction you make. You will get to know and trust each other a bit more after every deal, which will in turn pave the way for discounts on bulk purchases and similar goodwill gestures.

10. Failure to understand premiums over spot. Buying gold coins always involves a dealer markup or premium. This is what you're expected to pay over the spot price, and varies from dealer to dealer. It's critical to have some knowledge of fair premiums over spot in order to be able to identify any good or bad deals that might come your way.

In order to make sound decisions when buying gold, it is imperative that you first learn all you can about gold investing. There are lots of factors that impact each transaction, so the more you know, the better your chances of being successful.
Courtesy : EzineArticles.com

Gold, Silver surge on FED announcing Quantitative Easing 2.5 | Gold and Silver Blog

Gold, Silver surge on FED announcing Quantitative Easing 2.5 Gold and Silver Blog

Some blacks see racism in 'birther' questions

WASHINGTON (AP) -- Shortly after President Barack Obama declared himself an American-born citizen with papers to prove it, Baratunde Thurston declared himself a disgusted black man.

"I find it hard to summarize in mere words the amount of pain and rage this incident has caused," Thurston said.

"This" would be the nation's first black president standing in the White House, blue power suit and all, going on TV to debunk, in more detail than before, the persistent, he-ain't-really-an-American rumors fanned anew by Donald Trump, the developer and might-be presidential candidate.

Many African-Americans responded to Wednesday's scene with a large sigh. The rumors and the controversy had a particular, troubling resonance for them: They've seen, heard, lived, the legitimacy of black people being called into question so many times before that, they said, they weren't shocked to see it happen to Obama over something as simple as a birth certificate.

But they were sad about it, too, seeing what they felt was a high-level manifestation of the idea that when a black person accomplishes something great there must be something wrong.

"The stress of feeling constantly called into question, constantly under surveillance, has emotional and physical consequences for us," said Imani Perry, a professor at Princeton University's Center for African American Studies. "It also puts us in the position of not being able to be constituents, with respect to our politicians, because we feel we have to constantly protect the president. ... You see people attacking him, and he's the president, what happens to those of us who are not the president?"

This week, black people struggled to deal with what many of them perceived as a racially motivated dis of Obama at the hands of Trump and the "birther" movement. Fleeting thoughts about boycotting Trump's hotels and casinos, or pressuring advertisers to pull away from Trump's "Celebrity Apprentice" reality TV show bounced around Facebook and Twitter, the barbershops, the suites and the corner.

Much of it was just a notion, however. At the end of the day, many blacks said they remained at a loss for how best to process the falsehood that just won't die.

Obama said he had "watched with bemusement" as people kept alive for two years the idea that he might have been born outside the United States and therefore wasn't eligible to sit in the White House. "I've been puzzled at the degree to which this thing just kept on going," Obama said. He added that he understood the copy of the official birth certificate he produced still wouldn't silence all believers in this "silliness."

Ellis Cose, author of an upcoming book that explores anger and race, said there is a sense that Obama has become the lightning rod for a general longing among certain whites to "take America back to a time when people like Obama could not be president." For blacks, that's "clearly an aggravation," Cose said.

"A lot of folks are amused, and a lot of folks are upset about this," Cose said. "In addition to uncertainty about the economy and America's place in the world, a lot of people who grew up in confidence that America was a very white country are having that reality shaken."

Trump, who may or may not seek the Republican presidential nomination, stepped up to a microphone in New Hampshire within minutes of Obama's appearance to claim credit for forcing the president's hand. He said he still wanted to scrutinize the birth certificate to make sure it's legit.

Trump also wants to eyeball Obama's college grades, in search of bogusness around the bachelor's and law degrees the president got from Columbia and Harvard respectively. Trump said he'd "heard" Obama was a poor student unworthy of an Ivy League education, but offered no real proof.

That's what bothers black Americans so much - that sense that nothing they do can ever be considered good enough, said William Jelani Cobb, professor of Africana studies and history at Rutgers University. He recalled being on a flight recently, and expressing amazement when his seatmate, a member of Congress whom he did not name, said he, too, believed Obama was not really an American.

"It's partly American tradition of paranoia, and partly just plain old racism," Cobb said. "Illegitimacy is the rule, not the exception. It's the sort of thing that people come up with regularly when there are African-Americans operating at high levels."

Thurston, co-founder of the political blog Jack and Jill Politics, found out about Obama's action when he checked Twitter on his way to work. He was so disturbed that he sat before his webcam and poured his feelings into a seven-minute video that he then posted. Most of Thurston's ire was aimed at Trump and his glee over what he'd accomplished.

"Black people are taught, 'Your bar is higher. You have to answer harder questions. And you're never really, satisfactorily accepted,'" Thurston said in an interview. "That's a good motivator as a kid, it makes you run fast. But at some point, it's exhausting to carry such historical baggage in your daily life."

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Ron Paul says Bernanke ducks the issue

Rep. Ron Paul, the Federal Reserve’s most powerful critic, reacts to Ben Bernanke’s press conference. Here’s a lightly edited transcript of his remarks to the MarketWatch Radio Network. Paul is the chairman of the House monetary policy subcommittee, and is thinking of running for president again in 2012.

WASHINGTON (MarketWatch) — I found the press conference to be enlightening in the fact that we heard one, and he held one, and that’s a sign that the Fed knows that they have to be a little more responding to the demand for transparency. When I listened to what had to be said, I wasn’t too enthralled. I’ve heard it all before. Read more on Bernanke's press conference.

It’s smooth talking, to make current policy sound reasonable, and let it go at that. Because they never admit anything. When it comes to prices, it’s never their fault. I mean, how many different things did he mention about why prices go up, why we have inflation? He never admits it’s the inflation of the money supply that’s the problem.
When he was asked about the dollar, he said, “Well you know, the person in charge for the value of the dollar is the secretary of the Treasury.” Well, Bernanke can triple the money supply, and then he wants to duck the issue that he’s responsible.
He says, “Our position is a strong dollar” ... with constant devaluation, even while he spoke it was devaluing. Against gold, it went down 1.5%. It doesn’t make any sense.

It was more justification for a policy that doesn’t work. There was no explanation on how he’s going to get out of this. He did recognize, though, that price increases are significant and could be a problem in the future. It could be a significant problem for unemployment. He said it softly, but there were some words in there that convinced me that he knows that when inflation is admitted – I think it’s already here – but when he really admits it’s here, he’s really in a box. Because what he’ll have to do is raise interest rates, cut back on all the monetization of all this debt, buying all these securities, and then, in a weak economy, he’s in a mess
He works on the Keynesian assumption that prices go up for other reasons than the monetary reasons.
“It’s the supply and demand...Well, third-world nations are starting to buy more oil, that’s why the price of oil goes up.” And it has nothing to do with the inflation of the monetary system.
So, I think he does a good job for what he has to do, and that is try desperately to make a very, very failed system sound plausible. But from my viewpoint, it isn’t plausible, it’s not workable.
And I so strongly oppose centralized economic planning through monetary policy, especially in a small little group that can manipulate interest rates and the money supply and bail out privileged companies that are too big to fail at the same time the little people suffer. They lose their jobs and their mortgages and their houses.
So, to me, we have to have major monetary reform, and a bit of transparency. A pretense of transparency won’t suffice.

Gold futures gain as much as $10 ahead of Fed

SAN FRANCISCO (MarketWatch) — Gold futures gained as much as $10 an ounce Wednesday as investors looked ahead to the Federal Reserve’s monetary-policy decision and Fed Chairman Ben Bernanke’s press conference due later in the trading day for clues on inflation.

“A weakening dollar and rising inflationary concerns have supported the recent rally in gold,” analysts at ICICI Bank said in a morning note to clients. “Investors are likely to look for further cues from [the] U.S. Fed meeting that concludes later today.”

Gold for June delivery (COMMODITIES:GCM11)  touched a high of $1,513.60 an ounce on the Comex division of the New York Mercantile Exchange, though it’s pulled back slightly to $1,512.40, up $8.90.
On Tuesday, prices closed lower for the first time in nine sessions.
The Federal Open Market Committee is scheduled to announce its rate decision at 12:30 p.m. Eastern time. It’s expected to stick to its target federal funds rate of between 0% and 0.25% and its goal of buying $600 billion in Treasury securities by the end of June. Read more about what’s expected from the Fed meeting

For the metals market, overall sentiment is “subdued” as traders await the Fed statement, “which will likely determine mid-term direction given recent dollar-related movements,” analysts at TheBullionDesk.com said in a report issued Wednesday.
At last check, the dollar index (BOARD:DXY) , which measures the U.S. currency against a basket of six rivals, traded at 73.717, down from 73.789 in late North American trading Tuesday. Read the currencies story.
In the short term, both gold and silver are “vulnerable to corrections given the scale of long exposure, particularly if the Fed signals an imminent start of monetary tightening,” they said.
But “we think the Fed is more likely to maintain its current stance,” they said. “And given the broader issues of inflation, heightened Eurozone debt issues and MENA [Middle East North Africa] unrest, we expect dip-buying to underpin precious metals and maintain the current uptrend.”
Silver for May delivery (COMMODITIES:SIK11)  was up 72 cents at $45.77 an ounce. The contract had closed lower on Tuesday to end an eight-session winning streak.
June palladium (NEW:PAM11)  was also up 65 cents at $756.35 an ounce and July platinum (NEW:PLN11)  tacked on $8 to $1,813.40 an ounce, but May copper (COMMODITIES:HGK11)  fell 4.95 cents to $4.27 a pound

Libertarian Ron Paul to make another bid for 2012 Republican nomination

U.S. Rep. Ron Paul, R-Texas, speaks during a news conference Tuesday, April 26, 2011, in Des Moines, Iowa. Paul says he's forming a campaign exploratory committee as he moves closer to again seeking the Republican nomination for president. (AP Photo/Charlie Neibergall)

WASHINGTON - Ron Paul, the anti-war libertarian who's considered the Tea Party movement's "intellectual grandfather," has signalled he's running for U.S. president for the third time in his political career.

The 75-year-old Republican congressman announced in Des Moines, Iowa, that he's setting up an exploratory committee, generally the first step in an official run for president. Paul said he'd decide soon whether to formally enter the race.

"I would be very surprised if I don't make that decision in the month of May," he said.
Paul ran a dark horse campaign in 2008, resulting in a small but devoted support base, particularly among young voters who were particularly stoked by his support for the legalization of marijuana.
Four years later, amid a lingering recession and consternation about the country's gargantuan US$14 trillion nation debt, political observers say Paul's primary messages — smaller government and deficit reduction — could resonate with larger numbers of Republican primary voters.
"The dialogue has moved towards Ron Paul," Cal Jillson, a political science professor at Southern Methodist University in Dallas, said Tuesday.
"For the past 25 years he's been consistently worried about the money supply, deficits, debts and the Federal Reserve. He was all alone for a very long time, but now lots of people in the Republican party and beyond are concerned about those very issues."
Bruce Buchanan, a professor of government at the University of Texas, agreed.
"He represents the kind of fiscal prudence that not only appeals to the Tea Party, but also the broader Republican base right now," Buchanan said.
"If he acquires the kind of funding that he had last time, and the kind of grassroots support, he could do very well. And if the field turns out to be sparse, and people like Sarah Palin don't run, he could pick up a big chunk of their supporters."
Paul, who was the Libertarian Party's presidential nominee in 1988, finished a distant fourth to John McCain in 2008, behind Mitt Romney and Mike Huckabee. But he set fundraising records, bringing in substantial online donations, rivalling Barack Obama's similar triumphs during the presidential campaign.
Paul is strongly opposed to the Federal Reserve and its ability to print money, and successfully pushed Congress to pass a bill forcing it to open its books.
He wants income tax eliminated, wants to wipe out the Department of Education and has voted against raising the debt ceiling. Republicans, he argues, should have allowed the government to shut down in their ongoing fight with Democrats over budget cuts.
He has railed against what he calls "welfarism" at home and militarism abroad, and believes the U.S. should stop sending to troops to meddle in foreign conflicts like the one playing out in Libya.
His anti-military bent might not fly with some Republicans, but other stances cause the party to smile upon him.
He opposes gun control, and even believes pilots should carry firearms in cockpits. He's also strongly pro-life and has called himself an "unshakeable foe" of abortion, although he doesn't think the federal government should legislate abortion policy.
Paul is also opposed to universal health-care, critical of President Obama's health-care legislation due to its scale and scope. But he's also said he'd be willing to "prop up" Medicare and Medicaid with money saved by bringing troops home from foreign bases in places like South Korea.
On other topics, however, Paul could be a tougher sell for Republicans. Among other hot-button issues, he has called the war on drugs "a total disaster" that should be abandoned, and was in favour of a mosque being built near the site of the Sept. 11, 2001 terrorist attacks in lower Manhattan.
On Monday, Fox News's Sean Hannity pressed Paul about his stance on the mosque, asking: "You are not concerned about the families of 9-11 and what happened?"
"This means you blame the religion, you don't want to blame the religion," Paul responded. "The principle here is a private property principle. We shouldn't have governments building buildings and telling people where to build. It should be a private property issue."

His announcement came just a day after the surprise decision by Mississippi Gov. Haley Barbour to drop his plans to make a bid for the White House. Barbour, who had lined up major funding and top Republican strategists for a potential campaign, said Monday he lacked the "fire in the belly" to make a run.

Barbour is apparently not alone in his apathy. A recent New York Times-CBS News poll found that 56 per cent of Republican voters were unenthusiastic about any of the potential nominees.

Paul's entry into the Republican race ends speculation that his son, Sen. Rand Paul from Kentucky, was also eyeing a bid for the nomination. The freshman senator, also a Republican, has said he'd drop any plans to run if his father joined the field.

Paul is reportedly planning to appoint top Iowa Republican strategists in an attempt to win over the crucial primary state. The Iowa primary is the first in the 2012 cycle and most presidential hopefuls spent significant money and time there.

But Jillson predicted Paul's policies are too extreme for him to stand any real chance of winning the nomination.

"His message will resonate but he'll still be seen as a bridge too far," he said. "But he'll certainly be an interesting person to watch, someone who has had a consistent, unwavering message on substantial issues for many, many years."

Barrick buying Equinox Minerals for C$7.3 billion

NEW YORK (MarketWatch) — Canada’s Barrick Gold Corp. said Monday that it would buy copper miner Equinox Minerals Ltd. in a deal valued at C$7.3 billion, continuing the flurry of deal-making activity in the red-hot business of metals production.

Barrick Gold Corp. (NYSE:ABX)   (THE:CA:ABX)  will pay C$8.15 a share in cash for Equinox Minerals Ltd. (THE:CA:EQN)   (AUSTRALIAN:AU:EQN) , (PINK:EQXMF) , representing a 30% premium to the stock’s Feb. 25 closing price — the last trading day before Equinox said it would make a takeover bid for Canada’s Lundin Mining Corp. (THE:CA:LUN)   (PINK:LUNMF)

The acquisition of Equinox would add a high-quality, long-life asset to our portfolio and is consistent with our strategy of increasing gold and copper reserves through exploration and acquisitions,” Toronto-based Barrick Gold said.
U.S.-listed shares of Barrick Gold fell 4% in early trading on the New York Stock Exchange.
The deal comes after Chinese miner Minmetals Resources Ltd. bid C$6.3billion for Equinox Minerals on April 3, after which Equinox said it was approached by “a number of parties.” Adding to the rash of deals, Equinox in March reiterated its offer of C$4.8 billion for Lundin. See story about Equinox offer for Lundin.
As part of the agreement with Barrick Gold, Equinox said Monday it will withdraw its bid for Lundin.
Equinox shares rallied 11% in Toronto trading, while Lundin made fractional gains.
A closing date for the transaction between Barrick Gold and Equinox was not provided, but it’s expected to immediately add to Barrick’s earnings.
Barrick said it has sufficient cash resources and committed financing to fund the acquisition.
Financial advisers to Barrick were Morgan Stanley & Co. (NYSE:MS)  and RBC Capital Markets (NYSE:RY)   (THE:CA:RY) . CIBC World Markets Inc. (NYSE:CM)   (THE:CA:CM) , Goldman Sachs & Co. (NYSE:GS)   and TD Securities Inc. (NYSE:TD)   (THE:CA:TD)  acted as financial advisers to Equinox

Uranium is not going away

Commentary: The contrarian case for Uranium is compelling

BOSTON (MarketWatch) — Uranium prices have slumped. In the wake of the disaster at Japan’s Fukushima Daiichi nuclear plant, the price of a pound of uranium on international markets has tumbled all the way down to about $56.50, compared to $73 in early February. A few years ago it briefly topped $130.

Uranium has tumbled while oil has been booming. Today you can get two pounds of uranium for the price of one barrel of West Texas Light crude.

And yet the world needs energy. More and more of it. According Jonathan Hinze, vice president for international operations at uranium specialists UX Consulting, you need 10.4 barrels of oil to generate the same amount of energy as one pound of uranium. It’s not quite as simple as all that, but the comparison is not a facile one either.
You make money in this business by buying low and selling high. It’s easier said than done, of course. When things are low, nobody wants them.
It’s easy to see a bear case for uranium — or, at least, a case for this sharp sell-off. Fukushima has cast another cloud over the public image of the nuclear power industry. It is harder to sell the idea of more reactors — here or overseas. China has scaled back some nuclear plans and is reviewing safety issues. Germany is speeding up its move away from nuclear power altogether. Japan was forced to raise the level of its nuclear disaster to the same as Chernobyl. The headlines are terrible.
All this is known. It may already be reflected in the price of uranium.

But there is another side of the story.
The world may not like nuclear power, but it probably doesn’t have the luxury of going without it either. Energy needs are soaring. BP’s latest analysis predicts 40% growth over the next twenty years. Forecasts are always questionable. We can argue about the number, but hardly over the direction. We already know the story. In Asia and in other emerging markets, hundreds of millions of people are moving from the peasantry to the industrial middle class. They want cars, air conditioning, flat screen TVs and vacations abroad.
We’re going to need a lot more energy, from pretty much every source we can find. Coal, natural gas, oil, wind farms, solar paneling, and, barring miracles, nuclear reactors. No matter what you think of renewable and clean energy, nobody thinks they can provide all the answers.
The Chinese know this. They have trimmed expansion plans from 90 new reactors to 70, says Hinze, but they are still expanding. The same goes for other countries as well. The Germans are able to be so “green” at home, says UXC’s Jonathan Hinze, partly because they are able to buy some of their energy from nuclear France.
Everybody knows there are serious safety and environmental concerns. But so there are with nearly all sources of energy. Coal and oil are environmental disasters. Even hydro-electric has its issues. Consider the environmental cost of China’s now-infamous Three Gorges Dam.
There are about 450 nuclear plants in the world. Since Three Mile Island, 22 years ago, we’ve had two serious accidents. One, Chernobyl, involved monumental incompetence by a corrupt third world dictatorship. Fukushima was a forty-year old nuclear reactor that was hit by an extraordinary natural disaster. Those of us who grew up with the movie The China Syndrome half expected a catastrophe of Biblical proportions. I’m not making light of Fukushima, but I am arguing for perspective. People are killed down coal mines, or on oil platforms, all the time. It just doesn’t make the news.
The French get three-quarters of all their energy from nuclear power, and they have not had an accident yet (I apologize for tempting fate here, but one has to report these things.)
In a nutshell: There’s a very strong likelihood that the world, in due course, will decide that it needs many more nuclear reactors, and that the benefits offset the risks.
What of uranium?
Nuclear reactors need to replenish about a third of their uranium every twelve to twenty-four months. Currently the world’s reactors need about 70,000 metric tons a year. But the mining industry supplies something over 50,000 metric tons. Most of the rest comes from recycling old nuclear weapons. That’s a program that’s been going on for years. It is due to come to an end in 2013. (although some Russian weapons will still get recycled on an ad hoc basis, says Stephen Kidd, deputy director general of the World Nuclear Association).
As for other supplies? Uranium is abundant in the world, but not in usable quantities, or in a usable state. For the latter it needs to be mined and processed. Uranium was in a bear market through the eighties and nineties, with the result that there was little exploration and production. The world has been ramping up — quickly — in recent years. Major areas of production include Canada, Australia, and Kazakhstan.
According to the World Nuclear Association, the lowest-cost uranium mines — those with operating costs below $30 a pound — can only produce a maximum of about 60,000 metric tons a year. After that the costs start to rise pretty sharply. If you want 75,000 metric tons a year, the last tons will cost you about $60 a pound. In other words, today’s price is in the ballpark of the marginal cost. “There’s probably not a lot of room to go down further from here, given the fundamentals,” says UXC’s Hinze, though he adds that in short-term trading anything can happen.
None of this is conclusively bullish for uranium, naturally. But it is intriguing. No one wants this asset.
If you are a private investor, take a look at Uranium Participation Corporation (PINK:URPTF) , a Canadian closed-end fund that simply holds physical uranium. “It’s not exciting,” says David Wago, analyst at GMP Securities. “It just holds uranium in a warehouse, gathering dust.”
Shares in URPTF have been hit even harder by Fukushima than the price of uranium itself. From an intraday peak of $10 in early February they have plunged to $6.75. There’s little mystery why. Closed-end funds typically attract small scale investors. They are the first to panic and dump stock. That’s why closed-ends typically fall hardest in a rout.
Uranium Participation Corp. on Thursday said the net value of its uranium was 7.94 Canadian dollars ($8.34 U.S.) per share as of March 31. Since then, uranium prices have come down 5.5%. So Uranium Participation’s uranium is worth about $7.88 a share.
And yet the shares now trade for just $6.75, or 14% less. So you’re effectively buying the uranium for $48.40 a pound.
None of this is conclusively bullish. Commodities generally look overbought, and ominously popular. Uranium could keep falling in price. A decade ago it was only $7.50 a share, and the only floor one can ever be completely sure about is $0. Nonetheless uranium at $48.40 a pound may tempt contrarians.

MORE MONEY MOTIVATION

Canadian stocks rise, paced by mining

Canadian stocks were mostly higher on Wednesday, paced by the nation’s mining shares.

The S&P/TSX Composite Index (THE:CA:$ISPTX)  was up 1.2% at 13,907.

The S&P/TSX Capped Diversified Metals & Mining Index (THE:CA:TTMN)  was up 3.15% at 1,463.

The S&P/TSX Composite Index (THE:CA:$ISPTX)  was up 1.2% at 13,907.

The S&P/TSX Capped Diversified Metals & Mining Index (THE:CA:TTMN)  was up 3.15% at 1,463.

Among significant mining movers, Quadra FNX Mining Ltd. (THE:CA:QUX)  was up 10.2% after the company reported strong first-quarter production results, while Pan-American Silver (NASDAQ:PAAS)   was up 3.7% after it said the Bolivian government’s move to seize control of a number of privately operated mines has not affected the company’s San Vicente mine

First Quantum Minerals Ltd. (THE:CA:FM)  was up 7.2%; Thompson Creek Minerals (THE:CA:TCM)   was up 3.8%; Grande Cache Coal Corp. (THE:CA:GCE)   picked up 4.2%; and Taseko Mines Ltd. (THE:CA:TKO)   rose 3.3%.

Gold stocks also moved higher on the session, as gold for June delivery (COMMODITIES:GCM11)  added 80 cents to trade at $1,499.90 an ounce on the Comex division of the New York Mercantile Exchange.

Royal Gold (THE:CA:RGL)  was up 2.7%; Osisko Mining Corp. (THE:CA:OSK)  added 3%; and Franco-

Nevada Corp. (THE:CA:FNV)  was up 2.4%.

In the energy group, Suncor Energy (THE:CA:SU)   was up 3.2%, while Cenovus Energy Inc. (THE:CA:CVE)   added 2.5%.

Among tech firms, Research In Motion Ltd. (THE:CA:RIM)   was up 2.4%, a day after the release of its Playbook computer tablet.

Commodities markets summary

A summary of trading in key commodities markets 

ENERGY
US oil rose on Tuesday and Brent reduced losses in volatile trade as a weaker dollar and a rise in equities markets lift prices that earlier slumped on concern over sovereign debt and uncertain demand prospects.
After tumbling below $120 a barrel for the first time in two weeks, Brent came back as US crude futures turned higher.
The expiring US front-month May contract posted the day's biggest gain, reversing after support firmed above last week's low trade of $105.31 a barrel.
Brent crude for June fell 28 cents to settle at $US121.33 a barrel, after slipping as low as $119.03.
Expiring US crude for May rose $1.03 to go off the board at $US108.15, bouncing early off a $US105.50 low.
US June crude rose 59 cents to settle at $US108.28, recovering after sliding to $US106.01, just above the contract's $US105.98 low from last week.

Brent's premium to the US June contract narrowed 87 cents to $13.05 a barrel, based on settlements, swinging in a range on Tuesday from $12.38 to $14.31.

Solid euro zone economic data helped the euro rebound against the dollar after its worst day in five months.

OPEC Secretary General Abdullah al-Badri, speaking at an oil and gas trade fair in Tehran, said he did not expect oil to fall below $100 this year, even though there was no shortage in the market.

US retail gasoline demand rose last week from the prior week, but high prices kept demand down versus year ago, MasterCard Advisors' SpendingPulse said in a report ahead of weekly oil inventory reports detailing US stockpiles and demand levels.

US crude oil stocks are expected to be up a seventh consecutive week, according to a Reuters survey of analysts on Tuesday. Gasoline stocks were expected to be lower, while distillate inventories were seen unchanged.

PRECIOUS METALS

Gold futures hit an all-time high above $US1,500 an ounce on Tuesday and silver surged on a combination of dollar decline, crude oil gains and worries about sovereign debt problems in Europe.
After being initially pressured by technical selling, bullion rose to a record for a second straight day on market jitters after Standard & Poor's on Monday revised the credit outlook of the United States to negative from stable.

US gold futures activity was quieter than usual as global stock markets steadied following the previous session's equity sell-off on S&P's move. The CBOE gold volatility index, a gauge of bullion investor anxiety, fell two per cent after surging to its highest level in four months on Monday.

US gold futures for June delivery settled up $2.20 at $1,495.10, having earlier hit a record $1,500.50 an ounce.

Spot gold gained 0.11 cents to $1,495.19 an ounce by 3:03 p.m (1903 GMT), bouncing off a high of $1,499.31. Bullion rose for a fifth consecutive session.
Gold benefited as a safe haven from economic uncertainty after fears mounted that Greece will have to restructure its debt, maybe as early as this summer, and S&P threatened to cut the United States' AAA credit rating on Monday.

Silver set a 31-year high of $43.92 an ounce, and was later up 1.3 per cent at $43.90.

Silver has outperformed gold this year, up more than 40 per cent so far against gold's 5 per cent rise. The gold/silver ratio slipped to a 28-year low below 35 on Monday.

Gold remained far below its all-time inflation-adjusted high, estimated at almost $2,500 an ounce, set in 1980, an era of Cold War tension, oil shocks and hyperinflation.

Among other precious metals, platinum slipped 0.4 per cent to $1,766.24 an ounce, while palladium dropped 1.3 per cent to $730.47.


INDUSTRIAL METALS

Copper rose close to one per cent, clawing back some ground after six straight sessions of losses, helped initially by the weaker dollar, then pushed to session highs after stronger-than-forecast US housing starts.

Investors remained nervous about debt problems in the United States and Europe, limiting the red metal's gains.

Three-month copper on the London Metal Exchange traded last traded at $9,340 a tonne at 1649 GMT (1249 EDT) from $9,225 at the close on Monday.
US copper futures were up 3.60 cents, or 0.86 per cent, at $4.23.30 per lb.

World markets bounced back from the previous session's trouncing after better-than-expected earnings results from investment banking bellwether Goldman Sachs.

In the metals markets, expectations of a supply deficit this year and an optimistic long-term demand outlook provided support.

Increasing copper inventories, however, have raised concerns about some short-term demand weakness from China.

Inventories of copper on the London Metal Exchange rose 175 tonnes to 451,950 tonnes, its highest since June, the latest data showed. Inventory levels have been on the rise since December.

Copper was in a $21.50 contango, which is a discount for cash over three-month material, versus
December's $70 backwardation, which is a premium for cash over three-month copper, the latest data showed, reflecting a dearth of nearby demand.

Tin traded at $32,600 from $32,350, while zinc changed hands at $2,330 from $2,325, Monday's close.

Inventories of zinc on the London Metal Exchange rose 21,300 tonnes to 785,600, the most recent data showed, and are now within 2,000 tonnes of 2004 peaks.

Battery material lead traded at $2,552 from $2,528. The price of metal for tomorrow versus next day delivery traded as high as $10, indicating a lack of immediately available supply.

Aluminium recovered to $2,682 from $2,674.

Nickel was bid at $25,500 from $25,500.

Teck shares up on earnings report

Teck Resources earnings more than doubled in the latest quarter helped by surging coal and copper prices, sending the Canadian mining company's shares up more than six per cent Tuesday.

Teck Resources earnings more than doubled in the latest quarter, helped by surging coal and copper prices, sending the Canadian mining company's shares up more than six per cent Tuesday.
The Vancouver-based coal, zinc and copper producer said late Monday that it earned $461 million, or 78 cents per share, during the first three months of 2011, down from $896 million, or $1.52 per share, during the same period last year.
But adjusted for one-time items, the company earned $450 million, or 76 cents per share, more than double the $198 million, or 34 cents per share, for the same time a year earlier.
Sales were $2.4 billion for the quarter, up from $1.9 billion for the same time a year earlier.
Analysts had expected an average of 76 cents a share, on revenue of $2.2 billion according to Thomson Reuters.
The company's shares were up $3.11, or 6.4 per cent, at $51.88 on the Toronto Stock Exchange in mid-afternoon activity.
The better-than-expected results came despite a number of headwinds for the company.
Unusually difficult winter weather conditions hampered rail and port operations, dropping first-quarter sales to 5.0 million tones, down from the average 5.3 million tonnes of sales in the first quarter of each of the last six years.
Coal production during the quarter was also affected by a two-month strike at its Elkview mine earlier this year that resulted in a loss of some one million tonnes. Production resumed on April 8 after a new labour pact was reached.
As a result, the company produced 75,000 tonnes of copper, 4.4 million tonnes of coal and 238,000 tonnes of zinc in the first quarter of 2011, compared with the 72,000 tonnes of copper, the 5.7 million tonnes of coal, and 231,000 tonnes of zinc for the same quarter a year earlier.
Teck's first-quarter coal sales of five million tonnes topped its most recent forecast range of 4.6 million tonnes to 4.9 million tonnes.

A truck is shown at Teck Resources Coal Mountain operation near Sparwood, B.C. The mining giant reported first-quarter results that beat analysts' expectations. (The Canadian Press)

The company also said it now sees 2011 coal sales to be between 23.5 million tonnes and 24.5 million tones, while annual copper sales are expected to be in the range of 330,000 to 340,000 tonnes. It also said it expects "minimal impact" on sales to Japan following last month's earthquake and tsunami.

Traders ballpark new gold ceiling

Gold has breached yet another psychological barrier in its steady march upward. But with all the hot money moving into silver, there are conflicting views about when it may reach the next one, even as confidence in the U.S. dollar continues to erode.
As the key gold futures contract temporarily passed US$1,500 an ounce Tuesday, traders quickly started eyeing the next round number. The thinking is that if investors get used to the idea of US$1,500, a rapid move up to US$1,600 could be made in short order. That view was supported by Standard & Poor’s decision to turn negative on its outlook for U.S. debt.
“It does seem that once you break through a particular level of resistance, it brings new money into the equation and allows continued strength in the gold price,” said Chuck Jeannes, president and chief executive of Goldcorp Inc.
But recent history suggests breaking through has not been that easy.
It took extended periods for gold to get through prior psychological levels like US$1,000 or US$1,200. In each case, it flirted with those highs for many months before finally pushing through.
“If people say US$1,500 is going to be the top, a lot of traders start filling their sell orders there and it becomes a self-fulfilling prophecy,” said Aaron Fennell, commodity futures specialist at ScotiaMcLeod.
“But I think in this case, traders aren’t looking at US$1,500 as the top of the market at all.”
But in trying to predict future performance, he pointed out a broader truth: that despite gold’s spectacular performance, there has been surprisingly little interest in it.
Over the last several months, it is silver, and not gold, that has captured the imagination of investors and gone on an amazing run. Since the start of October 2010, silver has climbed roughly 97%. Gold, by comparison, is up 14%.
“Gold has just grinded higher slowly. It hasn’t really had that much enthusiasm around it,” Mr. Fennell said.
It was the same story on Tuesday. While gold drew a lot of headlines for reaching a landmark price, the June contract ended the day below US$1,500 and up just 0.1% in total. By comparison, silver jumped another 2.2% to US$43.91, the highest closing price since the Hunt brothers tried to corner the market in 1980.
Looking back over the last decade, experts pointed out that gold has never had the kind of massive break-out that silver is experiencing now. Despite the general view that gold prices are “soaring”, the move upward has been quite orderly, with a new high being reached every year. Other commodities like nickel, uranium and potash have had much stronger upward (and downward) moves.
“That’s something I always point out to people who talk about gold being in a bubble. This has been a long-term move,” Mr. Jeannes said.
Given that fact, experts refuse to put too much emphasis on the move to US$1,500, and focusing on long-term fundamentals instead.
“It’s so sentiment-driven that you’ll just be pulling your hair trying to guess what it’s going to do next,” said Pawel Rajszel, an analyst at Veritas Investment Research who is more bearish than most of his peers.
Financial Post

Gold sends Canada stocks higher

Canadian stocks bounce back into the black; gold hits $1,500 mark

CHICAGO (MarketWatch) — Canadian gold miners helped lift the broader market into the black Tuesday as bullion futures advanced into record territory, hitting the key mark of $1,500 an ounce.
The S&P/TSX Composite Index   edged up 0.2%, or 28.9 points, to 13,731.3, swinging back into positive territory after a weak start incited by rising inflation worries.
Toronto’s main metals and mining index  advanced 1.8%, fueled by a 6% jump in shares of base-metals miner Teck Resources Limited . The Vancouver-based company on Monday reported better-than-expected revenue for the first quarter.

 

Also advancing, Canadian gold-mining giant Goldcorp Inc.’s   stock rose 0.5%. Gold for June delivery added $2.20, or 0.2%, to trade at $1,495.10 an ounce on the Comex division of the New York Mercantile Exchange. 

Canada’s energy sector also made a late-day comeback as oil futures turned higher after protests erupted in Nigeria, weakening the U.S. dollar. Toronto’s main energy index   rose 0.1%, adding to the broader market’s gains.
Leading the pack, Calgary-based Suncor Energy’s stock added 0.8%, offsetting declines in shares of Canadian Natural Resources Limited   and Connacher Oil and Gas Limited , which posted losses of 0.3% and 1.4%, respectively.
Concerns of rising inflation pressured Canadian stocks at the market’s open, after Statistics Canada reported a 3.3% rise in inflation in the 12 months to March. The climb puts the country’s year-over-year inflation increase at its highest since September 2008.
The Canadian dollar   strengthened against its U.S. counterpart, rising 0.8% from Monday’s close. In early April, the Canadian loonie reached its three-year best against the U.S. greenback. On Tuesday, one U.S. dollar purchased 95.5 Canadian cents, down from 96.4 cents at Monday’s close.
The jump in the country’s Consumer Price Index, which is used as a gauge of inflation, rose from 2.2% in the 12 months to February.
Among other notable movers, Toronto shares of Research In Motion Limited    fell 2.2%. The Ontario-based BlackBerry maker released its new PlayBook tablet computer on Tuesday