How Much Longer Can the US Lead the Global Economy?


As a youngster watching the Olympic Games on TV, our two favourite events happened on the final day of the Games.

They were the 4 x 100 metre relay, and the 4 x 400 metre relay.

It was exciting stuff. Although the Americans always seemed to win both events.

The most exciting part of both races was the baton change. The 4 x 100m baton change involved the thrill as they tried to exchange the baton at full speed without stepping out of the change area.

The 4 x 400m baton change was more of a physical affair as runners jockeyed for position at the line, and tried to avoid other runners who were pulling up after their lap.

Sometimes it was a smooth transition. But most of the time there seemed to be some element of excitement, confusion, and occasionally disaster.

Thoughts of this sprang to mind as we considered a change of sorts happening in the world economy now. There’s plenty of excitement. An element of confusion. And most of all, the potential for disaster.

It’s what makes this ‘baton change’ perhaps the most exciting event in world financial history for the past 142 years…

A fascinating story popped up on our screen yesterday.

At first the headline intrigued us. But that was nothing compared to what we read in the first two paragraphs of the story.

In fact, as soon as we read those paragraphs we felt as though we didn’t need to read any further. It was as though it was the validation of every assumption we had made about this key economy.

This was the proof. It was as we thought it was, and this confirmed it. Importantly, it will have a major impact on how we approach investment markets for this year, and perhaps for the rest of our lifetime.

The biggest economic change in 142 years

The article in question was in yesterday’s Financial Times. The two paragraphs in question are as follows:

The US is on the brink of losing its status as the world’s largest economy, and is likely to slip behind China this year, sooner than widely anticipated, according to the world’s leading statistical agencies.

The US has been the global leader since overtaking the UK in 1872. Most economists previously thought China would pull ahead in 2019.

Stop and think about that for a moment.

The US has been the global economic leader since 1872. That’s 142 years.

That’s 10 years before the first ever Ashes test series. It’s 29 years before Australia as a nation state existed.

In all that time the US has led the world economically. But for how much longer?

If the statisticians at the International Comparison Program at the World Bank are right, then America’s dominance is about to end. The US economy is about to pass the baton — reluctantly — to the new big player in town.

And if this baton change is anything like the relay races at the Olympics, then you can be sure of a few thrills, some jostling, and even an upset or two.

OK. Comparing China’s looming economic dominance to an Olympic relay race is somewhat simplistic, arguably irrelevant, and perhaps even silly. But there is a point to this. Things change. The US hasn’t always been the economic leader.

And before that the UK wasn’t always the economic leader. And before that neither was France, or Spain, or Rome, or Greece, or Persia, or Egypt. Economies through time have always reached a peak, at which point an emerging or frontier market has taken the baton.

That’s where we are right now in the world, with the US ceding control of the global economy to China.

The new era of ‘frontier’ economies

The question is when China becomes the world’s biggest economy, can it hold on to that position?

There’s no guarantee. During the mid-1990s Japan seemed well placed to become the world’s biggest economy. It had closed the gap in GDP terms with the US and given the prevailing growth rates, Japan could have taken over as the world’s biggest economy by the early 2000s.

But that didn’t happen. The Japanese property and stock market bubbles burst, and ever since then the size of the Japanese economy has mostly gone sideways.

Nothing is ever certain. Even so, there’s no denying that China’s growth story over the past 10 years has been nothing short of astounding. But can the growth continue?

Well, we’re sure there were plenty of folks who doubted the sustainability of American growth in the 1870s. And yet that proved to be the beginning of 142 years of dominance.

And there were plenty of folks questioning China’s growth rate leading up to 2008. And yet China’s economy doubled between 2008 and 2012.

That’s not to say China will dominate for the next 142 years. Arguably, with better means of communication, new technology, and easier access to capital China will likely face competition with other emerging and frontier economies long before then.

But so what? Even if China only dominates the global economic scene for the next 50, 40 or even just the next 20 years, it’s likely to result in a huge shift of investment capital from traditional Western economies towards the frontier economies in Asia.

And if that happens, based on where things could be heading over the coming years it means that now and the years ahead could be the single best time to be an investor in the last 100-plus years.

If you’ve got any interest in building wealth (as you should), investing in China as it takes the helm as the world’s biggest economy is an opportunity no investor should miss.


PS: The prospect of this being an inflection point for the Chinese economy to become the world economic leader is a big part of why I’ve hired Ken Wangdong as Money Morning’s emerging markets analyst. Ken grew up in China, he has worked in China. And now from his base in Sydney Ken can give you the kind of insight on the Chinese people, the culture, the business practices, and most of all the investment opportunities. Read on for Ken’s take on China’s ecommerce ‘freight train’…

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China’s Ecommerce ‘Freight Train’, and What Made It Possible


China’s internet companies in social media and ecommerce are surely eager for attention. Not too long after Weibo went IPO on Nasdaq [NASDAQ: WD], the market has been turning its head towards China’s ecommerce giant Alibaba, in what could be a bigger IPO than Facebook, valued at US$168 billion.

Headlines are all well and good, but I will get into a few intricate details behind why ecommerce works in China.

Connectivity will find you!

There is no doubt the Chinese business-to-customer (B2C) market is huge. Currently, China has 560 million internet users (twice as big as the US market). Chinese internet users spend an average of 20 hours a week online.
This is just the beginning.

China has 1.35 billion people; the urbanisation rate is at 51%. This means the penetration rate is at 42%, and a little below the urbanisation rate.

I guess you’re getting my drift. China’s internet penetration rate tracks its urbanisation rate. This means only one thing. Connectivity will quickly reach the third and fourth tier cities, and I suspect this to be at an increasing speed.

This is because you only need electricity, smart phone dealers and telco coverage for people to get connectivity.

China’s literacy rate is 95.1%, meaning people of developing regions are ‘internet ready’; and China’s state-owned telcos will be ‘sent’ (by Beijing) to set up coverage in developing regions before anything else happens. In terms of broadband speed, China will match the US in 2015 (20Mbps).

From the lowest peasants to the highest kings, one shall hold a smart phone

This is very much the sight if you take the Line1 subway in Beijing. This line is the oldest subway line in China. It’s beneath Tiananmen Square and rolls along in a straight line cutting Beijing from the West to the East. This line is utterly crowded with tourists wanting to go to Tiananmen Square. The tourists are mostly Chinese from the outer Chinese provinces.

Judging from their clothes, you can tell they are not bankers and lawyers; perhaps, they have arrived from some faraway village. Their skin tone is somewhat darker than that of a typical Beijinger; they speak their local dialects.

Despite your inner unease about them talking too loudly, there is the great equaliser between ‘us city folks’ and ‘them country men and women’, they are holding smart phones!

So this is the future you need to expect for China. Mobile devices with connectivity through the internet, social media and ecommerce (along with gaming, entertainment, news etc) find their ways to developing regions in China. This is a story you need to invest into.

We deliver for free!

You have surely heard about China’s exploding online retail sales on such celebrative days as Singles day, Funerals day and Christmas. Yes, the Chinese are certainly a joyous bunch and the fact that there are very few Christians in China makes Christmas an odd holiday to have. Nevertheless, these are key dates for retailers and they make a fortune on these days.

One thing that makes ecommerce very different in China than it is in the West is the delivery model. You may have heard about’s [NASDAQ:AMZN] plan to send flying drones for goods delivery in the future. It may strike as odd, but from a Chinese perspective, it makes perfect sense.

Everything you buy online in China is delivered to your door either free of charge or for a tiny fee. This makes the ecommerce model work in China.

My friend, who was pregnant a few years back, was living in Shanghai. She once told me that she did nothing but shop online everyday during her pregnancy. She usually bought food, clothes and baby stuff from online retailers such as Tao Bao (the biggest B2C retail platform, under Alibaba) and Jing Dong (, currently filing for an IPO in the States). The goods would then be delivered to her.

There is a whole ecosystem in the delivery man’s business in China. Companies firstly package the goods, then send the goods by cheap labour (guys who have come to work in big cities on minimum wages), and they all drive low cost scooters (further lowering delivery costs).

Delivery isn’t limited to small goods. In fact, delivery companies can handle and deliver any size of product.

Delivery isn’t limited by geography either, meaning when you open your search bar in Tao Bao, you can source from all over China, and have goods delivered to you via lower cost delivery.

So you have a number of factors making ecommerce work in China: 1) low cost online retail that lowers the cost of otherwise having to run a physical store (having a physical store that doesn’t sell branded, high value goods is suicide in China); 2) ultra low cost of delivery; and 3) online payment systems.

There are a variety of online payment systems in China. These systems have copied the American ecommerce model. Credit cards are run by banks and credit card companies, direct debit through online banking systems, and payment systems similar to Paypal, namely the formidable ZhiFuBao (under Alibaba) and Paypal itself.

I hate to get up

The customer experience is great. You can find the best bargains, varieties and shops on China’s B2C ecommerce platforms. And refunds are acceptable. The marketplace is regulated by the companies who run the platforms. The marketplace is also regulated by ratings and reviews, so you can buy from creditworthy sellers.

In essence, having your groceries delivered to your door every day (referring to an online retail platform run by COFCO, one of the largest SOEs in China) changes you as a person.

Never mind the potential of this market; I will talk more in-depth about social media companies versus ecommerce companies in future instalments. There are a few more nuances in this space, and it’s important to identify the best opportunities in a huge and diverse market.

Ken Wangdong
Emerging Markets Analyst

From the Archives…

Investing in Technology — the Cheat’s Guide
26-04-14 – Shae Smith

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Outside the Box: Why Are So Many Boomers Working Longer?

By John Mauldin


There has been quite a lot of controversy in recent years around the idea that older workers – whose numbers are growing – have been taking jobs away from younger ones. Their numbers have certainly increased dramatically: the percentage of the labor force that is 55 or older grew from 29.4% in 1993 to 40.3% in 2013. And the unemployment rates of those 55 and older have dropped much faster than for younger cohorts; in fact we have seen those who are older than 55 take “market share” from the youngest. These are trends I’ve written about over the past year.

But did that increase and those trends cut into the employment prospects of young people? That is the central issue examined in today’s Outside the Box, which is an article by James J. Green that recently appeared on the ThinkAdvisor site. Green also does a nice job of laying out the reasons why Boomers are staying on the job. I have to admit that I was surprised by a few of the items he brought to my attention, and I think they’re worth thinking about.

But a lot of new ideas have come to my attention of late. Since I’m leaving for Europe in a few hours, I’ve been trying to call all of the speakers who will be on stage with me at the Strategic Investment Conference in just a few weeks, going over some of the logistics but mostly trying to probe a little bit to get an idea of the topics they will be covering. The theme of the conference is “Investing in an Age of Transformation,” and my hope is that the attendees and those who listen to the audio CDs will come away with a deeper and more complete sense of the powerful trends that are at play in the world today – and what to do about them now. How do you position your portfolios – not just to both protect yourself from the changes but also to take advantage of them?

I can honestly say I’m more excited about this conference than I was prior to any of the past ten. We kick off the conference with the always fascinating and prescient David Rosenberg. Last year at our conference he announced his transition to bond bear and full-on market bull and gave a strong presentation as to his reasons why. After David speaks, Rich Yamarone (chief economist at Bloomberg) and David Zervos (chief economist at Jefferies) will engage in a bull and bear debate but also share their usual thoughtful presentations on the investment climate. Jeff Gundlach of DoubleLine, whom Barron’s has dubbed the King of Bonds, will then take us behind the scenes in the world of fixed-income investing. You simply do not want to miss his PowerPoint presentation and powerful delivery.

My good friend Pat Cox of Transformation Technology Alert (a Mauldin Economics publication, I might add!) will talk about the amazing changes that are bubbling up in the technology space, with a focus on biotech and aging. Kyle Bass follows after lunch with what I can guarantee will be one of the most thought-provoking presentations at the conference. He has a smooth, confident delivery that is backed up by impeccable research. Then Gary Shilling will give us a lightning-fast presentation touching on the major facets of the world scene (he does seem to get to everything in 45 minutes – fasten your seatbelts), before my co-author Jonathan Tepper and Grant  Williams, the inimitable author of Things That Make You Go Hmmm…, double-team us with a joint presentation focusing on the view from London and Singapore and how international markets will fare in the near future. That night at dinner, three-star admiral Robert Harward, a Navy Seal and commander of the Seals prior to his very recent retirement, will tell us what it’s like to sit in the catbird seat, leading the best of our young men and women. I’m sure he will be talking about a few special nights in the recent past. (Think Osama bin Laden.) And that’s just day one.

Dylan Grice leads off the next day, and I don’t want to tip off his speech, but you want to be there. Somehow or other I’m supposed to follow his performance. I’ve been working on my speech for quite some time, as I want to develop a new theme. Without exception, the speakers who come to my conference always bring their “A games” to the podium, and so I have to try to elevate my own presentation just to keep up.

I made sure I wouldn’t follow Newt Gingrich, who will come up on the stage after me. He will be followed by Neil Howe (author of The Fourth Turning), who is probably the best demographer and analyst of generational trends in the world today. Two summers ago I had the pleasure of spending several long evenings with Newt and Neil as they made the history of the world come alive for hours on end. I live for experiences like that and am always looking for more of them. Listening to those two makes me realize just how much more there is to learn and think about. If Pat Cox and some of his friends can show me how to get an extra 40 to 50 years, I will need them just to catch up with Neil and Newt.

Paul McCulley will regale us at lunch the second day, in the slow Southern drawl delivery he learned at the knee of his Southern Baptist daddy. I sometimes feel like we should pass the collection plate after he’s finished his sermon. Then we’ll go to the other extreme as Dr. Lacy Hunt presents his latest research, which will not be as optimistic with regard to central banks as Paul will have been. Lacy is simply an intellectual force of nature. If you attend the conference, make sure you figure out how to spend a few moments in his space. He is very approachable, as are most of the speakers. Following a panel of some of the speakers, we’ll hear from George Gilder (Wall Street Journal contributing editor) and Stephen Moore (conservative thought leader) as they talk about the need for a new economics and a new politics. That night there is a poolside dinner where you can mingle with fellow attendees and the speakers.

And then we come to the third morning. Dear gods, you will need to fasten your seatbelt for this one. We start with geopolitical expert Ian Bremmer, who will lead us on a deep dive into the global situation and delight us with his inside stories of personal interactions with the global leaders who shape the nightly news. Anatole Kaletsky, the best-known economic journalist in Europe (and on whose cell phone are the direct-dial numbers of the biggest investors and global leaders in Europe), is going to reflect on where the global opportunities are; and then the one and only, the indomitable Niall Ferguson will share his incisive – possibly even incendiary! –thoughts about the problems and opportunities that China poses for the rest of the world. Finally, I will get Ian, Anatole, and Niall back up on stage for a panel discussion to close the conference.

That, my friends, is how to put together a conference that will expand our horizons as it deepens our understanding of the world. I design a conference that I want to attend, and then I invite all my friends to come. There are still some spots available, so maybe you should think about attending – there is simply nothing like being there, given all the opportunities for conversation and interaction; but if you can’t, then go ahead and purchase your audio CDs now for a discount off the post-conference price. You can register here or purchase CDs here. I hope to see you in San Diego May 13-16!

The driver will be here in less than two hours, so I really need to begin to think about packing and getting ready. I go to bed tonight somewhere over New York and wake up in London, then hop a quick plane to Amsterdam, where I will do some speeches for VBA Beleggingsprofessionals and then take a few days to see the area, spending a night in Delft and then slowly driving through the countryside to Brussels. I will spend the following few days with Geert Wellens of Econopolis in Brussels and then Geneva.

Last night the Dallas Mavericks lost a heartbreaker in the final few minutes to San Antonio, tying the series but requiring us, however improbably, to win two more games from the world champions. We came back from 20 points down to go ahead with not all that much time left, but we just couldn’t finish it. That’s the difference a few years makes. Four years ago this team closes it big-time. But it’s not over till it’s over, and every game has been back and forth. You really do like to see “your” team win in the end. I know that in reality it’s just one set of highly paid professionals vs. another, but it’s that human dynamic of our tribe versus their tribe, just without the swords and clubs. A lot more civilized and played by modern warriors doing things on the court that we mere mortals can only watch in awe. (But it would help if the referees weren’t so clearly in the tank for San Antonio and Tim Duncan. Just saying…)

I will be writing this weekend’s letter from Amsterdam, and my intention is to write about the thought process I went through in getting my mortgage and the terms I was offered, and how I am (finally!) hedging my mortgage in yen (and at what cost). I will also offer some comments on housing and Japan. It should make for an interesting letter and give you a glimpse at how I take my real-world economic analysis and turn it into actual investment decisions and trades. Until the weekend,

Your not quite ready for how expensive Europe will be analyst,

John Mauldin, Editor
Outside the Box
[email protected]

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Why Are So Many Boomers Working Longer?

By James J. Green
ThinkAdviser, April 17, 2014

Market watchers — or at least those pundits who are required to provide a reason for why the markets go up or down on a given day — love to speculate beforehand on the monthly employment figures, and then react quickly when the Department of Labor releases them. Those pundits, and their audiences, might be better served by looking at longer ranges of data on employment, such as the recently released Labor-force Participation Rates of the Population Ages 55 and Older, 2013, by the Employee Benefit Research Institute.

That report was written by EBRI’s Craig Copeland and considers data from the Census Bureau and the Bureau of Labor Statistics, along with EBRI’s own Retirement Confidence Survey. It concludes that labor force participation rates have increased for older Americans from the 1990s to the present, while the participation rate has fallen for younger Americans. That raises the question of why older Americans are working longer, and whether, as has been surmised, older Americans are “taking” jobs from younger Americans. As Copeland writes, “it appears either that older workers filled the void left by younger workers’ lower participation, or that higher older-worker participation limited the opportunities for younger workers or discouraged them from participating in the labor force.”

Before getting into that issue, some definitions are in order. First, the “labor force participation rate” measures those individuals in a specific age group who are “working or actively pursuing work,” which Copeland points out “is different from the share of those actually working who fall into a specific category.”

Second, let’s define the scope of the issue. Copeland says that the percentage of civilian, noninstitutionalized Americans near or at retirement age (age 55 or older) in the labor force increased from 29.4% in 1993 to 40.3% in 2013. In the report’s summary, Copeland writes:

  • For those ages 55–64, the upward trend was driven almost exclusively by the increased labor-force participation of women, whereas the male participation rate was flat to declining. However, among those ages 65 or older, the rate increased for both males and females over that period.
  • This upward trend in labor-force participation by older workers is likely related to workers’ current need for continued access to employment-based health insurance and for more years of earnings to accumulate savings in defined contribution (401(k)-type) plans and/or to pay down debt.
  • Many Americans also want to work longer, especially those with more education for whom more meaningful jobs are available that can be performed into older ages.

To return to the question of whether older people are “crowding out” younger people from jobs, it’s beyond the scope of the EBRI research to answer, but it turns out it has already been definitively addressed by researchers at Boston College’s Center for Retirement Research. The answer is no.

A 2012 paper by Alicia Munnell and April Yanyuan Wu, Are Aging Baby Boomers Squeezing Young Workers Out of Jobs?, is a serious academic work, discussing the “lump of labor” theory (the original “crowding out” theory from the mid-19th century), reviewing and analyzing the data, testing the theory, including a separate test “for the Great Recession” and exploring the “causal relationship between the labor force activity of the old and the young.” The conclusion?

“This horse has been beaten to death. An exhaustive search found no evidence to support the lump of labor theory in the United States. In fact, the evidence suggests that greater employment of older persons leads to better outcomes for the young — reduced unemployement, increased employment and a higher wage.” Moreover, these “patterns are consistent” for both men and women and for groups with different education levels, and were no different during the financial crisis, or Great Recession if you prefer.

So why should you care, as an advisor and/or as a member of this society? First, American workers are “undergoing a significant period of aging that appears likely to continue,” the EBRI paper points out. As evidence, Copeland cites EBRI’s most recent Retirement Confidence Survey (RCS), which found that “a growing percentage of workers expect to retire at later ages both because of the reasons described above [for health insurance, to pay down debt and to save longer for retirement] and/or because of an increased desire to continue to work.”

Older people want to work longer, at least those who enjoy their work, which in turn is directly correlated to how much education a worker has. “Overall, as workers’ educational attainment increased, their labor-force participation rate also increased,” Copeland reports. For example, in 2012, “60.7% of individuals with a graduate or professional degree were in the labor force, compared with 23.9% of those without a high school diploma.”

So that’s the entire labor force. What about older people and education? How did the financial crisis affect these workers?

“The recent economic downturn did not alter the trend of older workers in the labor force,” writes Copeland, “rather, it appears that this remained the trend, as more opportunities for older workers exist that correspond to their increased educational attainment. In fact, the increase in the percentage of those 55 or older in the labor force increased with the higher incidence of more highly educated people in this age group.”

So baby boomers, who are more highly educated than previous generations, are working longer. Millennials – those age 25 to 32 – are the most highly educated generation in American history: 34% have at least a bachelor’s degree.

Let’s compare boomers with millennials. A Feb. 2014 survey by Pew Research found  that way back in 1979, “when the first wave of baby boomers were the same age that millennials are today,” the typical high school graduate earned about three-quarters (77%) of what a college graduate made. “Today, millennials with only a high school diploma earn 62% of what the typical college graduate earns.” That same study compared educational levels of prior generations at the same age as millennials: only 13% of 25- to 32-year-olds in 1965 had a college degree; of the “early” boomers who were age 25 to 32 in 1979, 24% held college degrees.

However, actual worker earnings have stayed nearly flat for each cohort of 25- to 32-year-olds since 1965: from $30,892 in 1965 to  $35,000 in 2012 (in 2012 dollars).

So here’s where we stand. The boomer clients you have now are more likely to work longer, for a number of reasons but buttressed by the fact that they like to work (sound familiar, advisors?), which is positively correlated to being better educated.

The generations that follow the boomers will be even better educated, and so are more likely to work even longer and for the same reasons. One big caveat: the Affordable Care Act may make it less necessary for older workers to be employed merely for the health insurance they want and need. So we’ll have to see how that will play out.

But maybe Social Security is a little healthier than we thought. If you continue to work into older age, you’ll still be paying your Social Security taxes (as will your employer, of course); and you’ll be paying income tax if you take Social Security benefits while you’re still working, depending on your total income.

Yes, not everyone is able to work due to health issues as they age, but higher longevity added to more educated people working longer will be a net benefit to the Social Security system and to society. And remember, old people are not keeping young people down, at least when it comes to jobs.

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Duncan Hughes’ Quartet of High-Grade Winners

Source: Kevin Michael Grace of The Gold Report (4/30/14)

With gold hovering around $1,300 an ounce, there’s not much room for error, says Duncan Hughes of RFC Ambrian. In this interview with The Gold Report, Hughes counsels that investors should seek high-grade, low-cost projects with exploration upside in stable jurisdictions. He suggests three such companies in West Africa and another with silver, gold and antimony resources in Chile and Australia.

The Gold Report: After hitting $1,380 an ounce ($1,380/oz) in March, gold fell below $1,300/oz and has hovered around there since then. Do you expect the price to change much either way in the next few months?

Duncan Hughes: That’s not easy to predict. I think $1,300/oz seems a sensible assumption for 2014. If it were to fall much below that, most of the sector would be operating at a loss.

TGR: Assuming a gold price of $1,300/oz, what are the qualities that will distinguish the junior gold companies that become successful?

DH: In the recent past, companies paid too much attention to the size of resources and potential scales of production. The focus now is profitable production scenarios. Low-cost producers and undervalued developers that look likely to become low-cost producers are the key for investors.

One way to achieve stronger profit margins is through higher-grade ore bodies. Grade has always been king but is now even more so. Low-cost producers are not only most likely to survive this difficult market; those making profits may also pay dividends. Given that share-price appreciation is more challenging than previously, dividends have become more attractive.

TGR: To what extent should investors restrict themselves to companies with management teams with winning track records?

DH: If I were an investor, I’d look for management with a track record. If management doesn’t have that track record—not only finding mines but bringing them to production—then the asset is the overriding factor. If the asset is strong enough, I’d want board members with a nice mix of technical skills—a geologist, an engineer, perhaps even a metallurgist—complemented by members with financial skills and access to equity and debt finance.

TGR: After rejecting a bid from Goldcorp Inc. (G:TSX; GG:NYSE), Osisko Mining Corp. (OSK:TSX) has agreed to a friendly takeover by Yamana Gold Inc. (YRI:TSX; AUY:NYSE; YAU:LSE) and Agnico-Eagle Mines Ltd. (AEM:TSX; AEM:NYSE). Does this battle over Osisko suggest we will see an increase in mergers and acquisitions (M&As)?

DH: There have been rumors about Barrick Gold Corp. (ABX:TSX; ABX:NYSE) and Newmont Mining Corp. (NEM:NYSE) getting together. I do anticipate an increase in M&As in the gold space. Capital expenses (capexes) are generally smaller there, as compared to the iron ore space, where they run into the billions.

Many gold explorers are looking to reinvent themselves to stay alive. Companies with projects but no money will look for companies with cash but no projects and vice versa. There are a lot of opportunities out there at current pricing.

TGR: Which type of company is most likely to be taken out?

DH: Because funding is much harder to secure than it once was, the main focus will be developers with strong projects that require significant initial capital expenditures. We saw this with the takeover of PMI Gold Corp. by Asanko Gold Inc. (AKG:TSX; AKG:NYSE.MKT). Asanko had a large cash balance, and PMI had a good project. Other examples would be Endeavour Mining Corp.’s (EDV:TSX; EVR:ASX) buyout of Adamus Resources Ltd. for its Nzema project in Ghana and B2Gold Corp.’s (BTG:NYSE; BTO:TSX; B2G:NSX) acquisition of Volta Resources Inc. for its Kiaka project in Ghana.

We’re also seeing this in the Australian junior space. Gold producer Northern Star Resources Ltd. (NST:AUX) has recently acquired Barrick’s West Australian gold assets.

TGR: Are there any likely takeover candidates among the companies you cover?

DH: Two quality juniors with good projects facing capex challenges are Papillon Resources Inc. (PIR:ASX) and its Fekola project in Mali, and Orbis Gold Ltd. (OBS:ASX) with its Natougou project in Burkina Faso. Fekola will cost about $300 million ($300M) and Natougou about $200M. It would have been pretty easy for these companies to have found such financing in 2007, but it’s difficult now.

The likes of Randgold Resources Ltd. (GOLD:NASDAQ; RRS:LSE), Endeavour or B2Gold might be looking at these opportunities.

TGR: Is there a capex sweet spot for these midlevel project takeovers, $200–300M, perhaps?

DH: That sounds about right. Papillon’s market cap is $416M, so when you add the takeover premium, you’re getting up there. Orbis’ market cap is only $60M, so that’s a different story.

TGR: What’s your top Buy recommendation?

DH: Mandalay Resources Corp. (MND:TSX). This is a good example of a low-cost producer that pays dividends.

TGR: Mandalay announced on April 23 its intention to borrow $60M. What’s the reason for this?

DH: The announcement states that it is to take advantage of opportunities in current debt markets. Mandalay has long said it is looking to acquire undervalued assets, as it has done successfully in the past. The opportunity to tap into a debt facility obviously puts Mandalay in a much stronger position to make further acquisitions.

TGR: How does Mandalay’s acquisition of the Challacollo silver-gold project in Chile complement its Cerro Bayo silver-gold project in Chile?

DH: I wouldn’t say they really complement each other as they’re geographically a long way apart: Challacollo is in northern Chile and Cerro Bayo is down in Patagonia. Challacollo will not go into production for several years. It’s more a case of management following its strategy. Mandalay said it would pick up an undervalued high-quality asset, and Challacollo certainly looks to be that. More metallurgical work needs to be done, but Challacollo has good potential to be a low-cost silver producer.

Mandalay is still all about two successful operations. Cerro Bayo produces silver (after gold credits) at $11/oz all-in. That’s low cost. Cerro Bayo was not being mined optimally by Coeur Mining Inc. (CDM:TSX; CDE:NYSE) when Mandalay bought it in 2010. Now Mandalay is making a nice profit on it. Costerfield, Mandalay’s gold-antimony mine in Australia, has always been a challenging project. Mandalay has turned it around and made it profitable as well.

TGR: Mandalay shares are trading at $0.93. Is it undervalued?

DH: Yes, considering the possibility of expansion in 2014 and the fact that Mandalay is actually making money at current metals prices. Cerro Bayo and Costerfield are high-grade operations, and when you do a standard discounted cash flow model, you obviously can’t factor in too much future production. This means that the net present value you generate probably doesn’t do the company justice given that it takes many years to drill out the resources and reserves of these ore bodies.

At Cerro Bayo, for example, Mandalay recently had some really significant exploration drill results, demonstrating that the current veins being mined continue for some distance under the shallow Laguna Verde. I don’t think the market has picked up on the significance of that.

TGR: You called Papillon’s Fekola gold project in Mali “good.” How good is it?

DH: It would be difficult to find another junior gold project as good as Fekola. It has 5.15 million ounces (5.15 Moz) at 2.4 grams per ton (2.4 g/t) with good metallurgy and low strip ratios. It could be mined from one open pit, and recent company work has suggested that there may be opportunities for shallow satellite pits as well. Production is forecast to begin in 2017: 320,000/oz per year over the first 11 years at an all-in cost of $740/oz.

And Papillon has strong management. Mark Connelly is the CEO. He worked at Adamus and has developed projects from exploration through to production. The non-executive chairman, Ian Middlemas, has a strong track record of developing projects to the point of being taken out. Fekola is close to Randgold’s 17.9 Moz Loulo-Gounkoto projects, AngloGold Ashanti Ltd.’s (AU:NYSE; ANG:JSE; AGG:ASX; AGD:LSE) 13.1 Moz Sadiola project and Endeavour’s 3.8 Moz Segala/Tabakoto project. Given Middlemas’ track record, I would say that Papillon has to be a target.

TGR: Could you compare Papillon to another company operating in Mali, Legend Gold Corp. (LGN:TSX.V)?

DH: Legend’s Tiekoumala project is at a much earlier stage than Fekola and has 590,000 oz (590 Koz) Indicated and Inferred. Legend has just announced a joint-venture agreement with Randgold on seven of its permits. Randgold is, of course, a producer with high-quality assets throughout Africa.

TGR: How should investors balance potential reward and risk in West Africa, specifically with regard to the various gold-producing jurisdictions?

DH: Several years ago, gold companies in West Africa traded at a premium because of the excellent exploration opportunities engendered by the geology. Since then markets have changed, and investors have become risk averse. In Africa, we have seen the Arab Spring, a push for nationalization and the coup in Mali. These events remind investors that the African political landscape is not as secure as some other parts of the world.

But the geology of the Birimian Greenstone Belt hasn’t changed. A number of countries, such as Côte d’Ivoire, Liberia and Burkina Faso, have vast fortunes in land that is still relatively underexplored. Ghana has a track record of political stability and stable gold production. Next door, in Côte d’Ivoire, which lacks this stability, there is the same geology but many fewer mines. Guinea is working through a new mining code, and I would say that it is still a risky place to consider.

Burkina Faso, on the other hand, is a great place. It has got seven gold mines coming into production there.

TGR: Liberia was considered a failed state for decades. How great has its recovery been?

DH: I see real opportunity there. It’s like Burkina Faso, at an earlier stage of development, obviously. I visited after the 2011 election, which was peaceful. Ellen Johnson Sirleaf, who won the Nobel Peace Prize that year, was re-elected.

I met the minister of mining and came away with the feeling that the Liberian government is very supportive of mining. Before the political strife began in 1980, Liberia was a significant iron ore producer and retains that infrastructure.

TGR: Which gold company in Liberia do you rate a Buy?

DH: Aureus Mining Inc. (AUE:TSX; AUE:LSE) is looking to bring Liberia’s first gold mine, the New Liberty mine, into production in Q1/15. The government demonstrated its support of the company by amending its mineral development agreement and reducing the corporate tax rate from 30% to 25%, while reaffirming the 3% royalty.

The government takes a 10% free carry. This is typical in West Africa. New Liberty’s license has been affirmed for 13 years, which is more than Aureus needs based on current reserves.

TGR: Aureus closed a $15M offering April 22. What’s the significance of that?

DH: I wasn’t expecting it because the company went to the market late last year to raise money for exploration. That made sense because Aureus has excellent exploration upside. Going back to the market now suggests that it might be falling slightly short of the $125M New Liberty capex requirement. I would hope that only a small part of the $15M financing will be needed for New Liberty and that the rest will be used for exploration.

TGR: What’s the size of the resource at New Liberty?

DH: It is 924 Koz at 3.4 g/t and a quite high strip ratio. According to the definitive feasibility study, the mine is expected to produce 119 Koz annually for the first six years of production at $900/oz. This should be a profitable operation.

TGR: That’s a short mine life. How much exploration potential do you see?

DH: A lot. Not necessarily at New Liberty itself but instead at Aureus’ Ndablama project about 40 kilometers away. In that part of the world, that’s probably a bit too far to truck to New Liberty, but what’s exciting about Ndablama is that it is shaping up to be another standalone gold operation. New Liberty is the present, but Ndablama is probably the future.

TGR: How good is Orbis’ Natougou project in Burkina Faso?

DH: It’s the grade that wins there: 1.8 Moz at 3.7 g/t with good metallurgy. All shallow and open-pittable, a relatively flat-lying ore body. It should be profitable and has the opportunity for a quick payback because the high-grade comes to the surface. It has quite a high strip ratio, but the exploration upside at Natougou is substantial. Less than 5% of a 50-square-kilometer gold anomaly has been tested, but the company is quite rightly focused on developing Natougou first.

Orbis also has very strong exploration ground elsewhere in Burkina Faso, in the Houndé Greenstone Belt, which hosts SEMAFO Inc.’s (SMF:TSX; SMF:OMX) Mana operation and also Roxgold Inc.’s (ROG:TSX.V) Yaramoko project. It’s a very fertile belt, and Orbis has been hitting some really exciting intersections there. All this and a market cap of only $60M makes for a good opportunity. Natougou is a good two years away from production. Orbis is doing a feasibility study now. We estimate that permitting should take about one year. I have a Buy rating on Orbis and a target price of $0.70, which is significantly higher than the $0.26 it trades at now.

TGR: SEMAFO has had a great deal of trouble in recent years, and in response the company has consolidated its operations. SEMAFO is pretty well just Mana now. How much difference will this make?

DH: I think it will make a difference. SEMAFO’s other operations in Niger and in Guinea were not the big picture; Mana has always been the prize asset. It’s a great project: 2.3 Moz at a pretty good grade of 2.8 g/t. The question for the company is whether its billion-dollar market cap can be justified based solely on Mana.

TGR: Sticking with Burkina Faso, how do you rate B2Gold and Roxgold’s assets there?

DH: B2Gold, because it has assets throughout the world, is not a peer of Orbis. Kiaka, however, which B2Gold acquired from Volta, can be compared to Orbis’ Natougou. Kiaka’s a big project, but it’s very low grade. I think that in this market it would be very difficult to get it up and running.

Kiaka looks to be a project waiting for the gold price to lift substantially because in order to justify the high capex, B2Gold would need to put through a lot of tons to get the economies of scale with the low-grade ore.

TGR: How is Roxgold doing on grade?

DH: Yaramoko is a great asset: a probable resource of 759 Koz at 11.8 g/t. It’s going to be an underground operation rather than open pit. And Roxgold’s market cap is $163M, which is more than twice Orbis’ market cap. But that’s the premium you’d expect given the grade.

TGR: We recently did an interview with analyst Richard Karn and he pointed out that 200 of the 700 ASX-listed mining and resource companies are effectively moribund.

DH: You could make a similar judgment about the TSX Venture Exchange.

TGR: Certainly. Karn argued that the culling of these “zombie” companies would be a positive step. Do you agree?

DH: Yes. Many companies on the Australian Stock Exchange, the TSX Venture Exchange and London’s AIM exchange are not going to make it, and that consolidation will be a good thing. As I mentioned earlier, investors in the recent past just looked at the size of a resource and said, “Wow. There’s 2 Moz there, and this stock looks cheap.” But they weren’t looking at the quality of those ounces. I think investors have since wised up. Too late, however, for many companies.

TGR: Some 12 months ago, when it seemed that gold might fall to $1,000/oz, financing pretty much dried up. Now that gold seems to have stabilized around $1,300/oz, has the funding picture improved?

DH: I don’t think it has improved that much yet. You said that the gold price seems to have settled, but let’s face it, this stability has only existed for a very short time. I think major financiers and the equity markets need to be persuaded that there is a floor of perhaps $1,200–1,300/oz. When this occurs, funding will improve.

TGR: Duncan, thank you for your time and your insights.

Duncan Hughes has been head of research for RFC Ambrian Ltd. in Perth, Australia, since 2010. A geologist, he has more than 15 years of experience in the resources industry and managed the discovery and development of the Prospero, Tapinos and Alec Mairs ore bodies for Jubilee Mines/Xstrata. He worked previously for CD Capital and Linq Capital. He holds a Bachelor of Science (Honors) from Oxford Brookes University and a Master of Business Administration from Imperial College London.

For additional comments on Goldcorp Inc., Osisko Mining Corp., Papillon Resources Inc., Orbis Gold Ltd., Roxgold Inc., SEMAFO Inc., Randgold Resources Ltd., Mandalay Resources Corp., Northern Star Resources Ltd. , Asanko Gold Inc. , Agnico-Eagle Mines Ltd., Endeavour Mining Corp., B2Gold Corp., Barrick Gold Corp., Newmont Mining Corp, Legend Gold Corp.,and Yamana Gold Inc.from newsletter writers, money managers and analysts, click on their respective links or visit The Gold Report.

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1) Kevin Michael Grace conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Mandalay Resources Corp. and Roxgold Inc. Goldcorp Inc. is not affiliated with Streetwise Reports. Streetwise Reports does not accept stock in exchange for its services.

3) Duncan Hughes: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Orbis Gold Ltd. and Mandalay Resources Corp. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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World Money Analyst: Europe: Cliff Ahead?

By Dirk Steinhoff

(This article originally appeared in World Money Analyst)

When Kevin Brekke, managing editor [of World Money Analyst], contacted me last week, I knew it was time again to survey the investment landscape. This month, I will focus on Europe and its decoupled financial and real-economy markets.

Globally, the last two years were marked by booming stock exchanges of developed markets, disappointing bond markets, and devastation across the precious metals markets.

Since June 2012, the EURO STOXX 50 Index, Europe’s leading blue-chip index for the Eurozone, has advanced by approximately 50% and outperformed even the S&P 500 and the MSCI World indices.

Over the last six months, European stock exchanges have seen a surprising change of leadership: The major stock market indices of the “weaker” countries, like Portugal, Spain, and Italy, have outperformed those considered stronger, like Germany. One of the top performers was a country that was and still remains in “bankruptcy” mode: Greece.

The question at this point is: Can these outstanding European stock market performances continue?

In our search for an answer, let’s start with a closer look at the economic conditions within the European Union (EU), where approximately 2/3 of total “exports” (internal and external) of the EU-28 are traded. And then let’s have a look at the economic setting of some major trading partners, such as the US and BRIC countries, which account for roughly 17% and 21%, respectively, of the external exports of the EU-28.

Although the EURO STOXX 50 Index has soared since June 2012, certain key measures of the underlying real economies paint a different picture.

To start, the GDP of the EU-28 is not really growing. In 2012, it contracted by 0.4% and grew by the smallest fraction of 0.1% in 2013. The GDP growth numbers for the countries in the euro area are even worse: -0.7% in 2012 and -0.4% in 2013. Whereas Germany’s GDP was up in 2013 by 0.5%, economic growth was down in Spain, Italy, and Greece by -1.2%, -1.8%, and -3.6%, respectively.

Real GDP Growth Rates 2002-2012






















































































The EU unemployment rate stood at 10.2% at the beginning of 2012 and stands at 12.1% today. That the European Union is anything but a homogenous body that moves in unison can be seen in the following chart:

Where Germany has a current unemployment rate of 5.2% and a youth (under 25) unemployment rate of 7.5%, the numbers for other countries are worrisome: Current unemployment in Spain is 26.7%, and 12.7% in Italy, with youth unemployment in Spain at an incredible 57.7%, and 41.6% in Italy. And don’t forget Greece, which is mired in a historically unparalleled economic depression where unemployment is 28% and youth unemployment is a shocking 61.4%. Keep in mind that all of these numbers are those officially released by bureaucratic agencies. The real numbers, as we know, would likely be even worse.

Recent EU industrial production numbers have shown some slight improvement. Nevertheless, industrial production has only managed to recover to its 2004 level, and remains way below its 2007 heights (see next graph).

Source: Eurostat

So let’s see: a shrinking GDP, high and rising unemployment, and stagnant production significantly below 2007 levels. Those are not the rosy ingredients of a booming economy (as indicated by the stock exchanges) but of one that is struggling.

Europe is not in growth mode.

This verdict is further supported by the export numbers for trade between EU countries, known as internal trade. In 2001, internal trade accounted for 67.9% of EU exports. Today, this share is down to 62.7%. In an attempt to compensate for sluggish European growth, EU companies had to develop other export markets, such as the US or the emerging markets.

Will these markets help rescue European companies?

Time to Taper Expectations

With regards to the US, two important developments are worth mentioning. The first key development, which will have severe consequences for the global economy, was brought to my attention by my friend Felix Zulauf, an internationally well-known investor and regular member of the Barron’s Roundtable for more than 20 years. Running ever-increasing deficits in its trade and current accounts for almost 30 years, the US thus provided an enormous amount of stimulus for foreign exporters. Since 2006, however, the US trade deficit has shrunk, with deteriorating trade data for many nations as a consequence.

The second key development is that the newly appointed head of the US Federal Reserve system, Janet Yellen, seems determined to continue the taper of its bond buying program. This fundamental shift in monetary policy could be questioned if the economic numbers for the US begin to show significant weakness. But in the meantime, the reduction of economic stimulus in the US should lead to a reduced appetite for European export goods.

The emerging markets had been seen, not too long ago, as the investment opportunity and alternative to the fiscal and debt crisis-stricken countries of the developed world. Today, on a nearly daily basis, you hear bad news about the situation and developments in the emerging countries: swaying stock markets, plunging currencies, company bankruptcies, corruption scandals, and even riots.

The emerging markets are dealing with the unintended consequences of the Quantitative Easing (including liquidity easing and credit easing) programs in the West. The increased liquidity spilled over into the emerging markets in the hunt for yield. This flow of capital into the emerging markets lowered capital costs, inflated asset prices like stocks and real estate, and boosted commodity prices. All that, and more, sparked the emerging markets boom.

Now, this process has reversed. The natural conclusion to exaggerated credit-driven growth, the tapering of QE programs, the shrinking US trade deficit, and lower commodity prices has been an outflow of capital from emerging markets, triggering lower asset prices and exchange rates. The attempt of some countries to defend their currencies by raising interest rates will only exert further pressure on their economies.

With weaker emerging market economies and currencies, there will be no big added demand for European exports. Revenues and profits for EU companies (measured in euros) will fall.

When Trends Collide

So, over the last two years we had opposing trends—booming European stock markets and weak underlying real economies. This conflicting mix was mainly fostered by easy money that drove down interest rates to historic low levels. Plowing money into stocks, despite the poor fundamentals, was the only solution for most investors.

At their current elevated levels European stock markets appear vulnerable, and it seems reasonable to doubt that we will see a continuation of booming stock markets. Of course, such a decoupling can continue for some time, but the longer it continues, the closer we will get to a correction of this anomaly. Either the real economy catches up to meet runaway stock prices, or stock prices come down to meet the poor economic reality. Or some combination of the two.

Because of the economic facts that I discussed above, in my view, we may be seeing just the beginning of a stronger correction in stock prices.

Dirk Steinhoff is chief investment officer of portfolio management (international clients) at the BFI Capital Group. Prior to joining BFI in 2007, Mr Steinhoff acted as an independent asset manager for over 15 years. He successfully founded and built two companies in the realm of infrastructure and real estate management. Mr Steinhoff holds a bachelor’s and master’s degree in civil engineering and business administration, magna cum laude, from the University of Technology in Berlin, Germany. Contact: [email protected].

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U.S. GDP Crawls in Q1 2014

By U.S. GDP Crawls in Q1 2014

Analysts predicted that the United States would jump leaps and bounds in the first quarter of 2014. But, the sobering reality is that U.S. gross domestic product (GDP) grew by a mere one-tenth of a percentage. This is more than disappointing, because Q1 2014’s performance is a small fraction of Q4 2013’s. So, though GDP has increased, the rate at which it’s increasing is diminishing. Apparently, the ice-cold, snowy winter almost froze the nation’s growth.

Summit Place Financial Advisors’ Liz Miller is stunned by the first-quarter numbers: “It’s a shock. Given we’re 20 minutes into the market, everyone will sit back and say, let’s wait for a revision.”

Winter’s rigid weather left goods stuck at ports and, coupled with overseas economic slowdowns, exports plummeted. Not to mention, the wet weather hurt home building. Therefore, businesses decreased inventory and cut spending for equipment.

Consumers bought fewer goods, since, for a good majority of the time, the harsh weather held them hostage in their homes. What they did spend more on, however, was home heating, as well as medical services, thanks to the Affordable Healthcare Act.

Now that winter snowstorms have turned into spring showers, analysts say that demand will bounce back and growth will pick up.

The GDP number came right on the heels of (literally hours after) the end of the Federal Reserve’s two-day meeting. Markus Schomer, Pinebridge Investments’ Chief Economist, claims that despite the weak data, the Fed’s bond purchase program won’t be thrown off course.

Schomer adds, “I’d be shocked if they take that number, [one] we all know is whacky, and base a momentous decision with implications for the financial markets on that very low-quality number.”

At the end of May, we’ll have a revised GDP estimate. But for now, this is what we have to work with.

The post U.S. GDP Crawls in Q1 2014 appeared first on Wall Street Daily.

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Original Article: U.S. GDP Crawls in Q1 2014

Albania holds rate, sees 2014 as economic turning point


    Albania’s central bank maintained its key interest rate at 2.75 percent and said it will maintain the same stimulating policy in the medium term as inflationary pressures will remain subdued.
    But the Bank of Albania, which has cut rates by 250 basis points since October 2011 and most recently by 25 points in February, voiced confidence that the economy was improving, with indicators of growth, businesses perception and financial markets improving faster than expected.
    “New information signals that 2014 may be a turning point for the economic activity in Albania,” the bank’s governor, Ardian Fullani said after a meeting of the bank’s supervisory council.
    Albania’s inflation rate averaged 1.9 percent in the first quarter of 2014 and in March it rose to 2.2 percent from 1.9 percent in February, returning to the bank’s target band. The bank
targets inflation of 3.0 percent, plus/minus one percentage point.

    Fullani expects inflation four quarters ahead to range between 0.5 percent and 3.9 percent.

    Albania’s inflation rate has remained low due to the weak economy, downward imported inflation and anchored inflationary expectations, he said after a meeting of its supervisory council.

    But the combination of an expected improvement in the world economy, implementation of stimulating macroeconomic policies and an acceleration of structural reforms “signals that the Albanian economy may gradually improve in the quarters ahead,” Fullani said.
     Albania’s Gross Domestic Product expanded by 2.32 percent in the fourth quarter after 2.0 percent quarterly contraction in the third quarter. On an annual basis GDP rose by 1.1 percent compared with shrinkage of 2.3 percent in the third quarter.
    For the full year, Albania’s economy expanded by 0.7 percent and the International Monetary Fund forecasts 2.1 percent growth this year, rising to 3.3 percent in 2015.
    Fullani said the increase in fourth quarter activity was broadly due to a positive performance of domestic private demand while the contribution of the public sector and net exports was negative.
    But economic growth is expected to be more balanced this year, driven by both domestic and external demand, with improving confidence enabling the real sector to benefit from the monetary stimulus.
    “Looking ahead, our basic projections suggest that, after a weak performance in 2013, the trajectory of the Albanian economy will be upward in the medium-term horizon,” he said.
    In the short term, however, the cyclical weakness of aggregate demand is expected to keep the economy below its potential, accompanied by weak inflationary pressure.


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Azerbaijan cuts rate by 50 bps on low inflation

    Azerbaijan’s central bank cut its benchmark refinancing rate by 50 basis points to 4.25 percent due to the low level of inflation and the need to further support growth.
    The Central Bank of the Republic of Azerbaijan (CBA), which last cut its rate in February 2013, also lowered and narrowed its interest rate corridor.
    The rate of the upper limit of the corridor was cut to 6.0 percent from 7.0 percent while the lower limit was reduced to 0.5 percent from 1.0 percent, the bank said.
    The bank said the country’s economy continued to grow in the first quarter, with the non-oil sector the main source while currency reserves had also grown.
    Azerbaijan’s inflation rate fell to 2.0 percent in March from 2.1 percent the previous month. The central bank has forecast inflation between 1.0 and 5.0 percent this year, with an outcome of 2.4 percent as the most likely. The CBA’s inflation target is 5-6 percent.
    Azerbaijan’s Gross Domestic Product expanded by an annual rate of 2.5 percent in the first quarter of this year, down from 5.8 percent in the fourth quarter of 2013.


Fed trims QE by $10 bln, rate low for considerable time

    The Federal Reserve, the central bank of the United States, trimmed its asset purchases by another $10 billion to $45 billion in May, as widely expected, and reiterated that it still expects to maintain the current target range for the benchmark federal funds rate “for a considerable time after the asset purchase program ends.”

    (more to come)