InvestMacro Forex News

By WallStreetDaily.com

With the situation in Syria, the “Fed taper” and a possible emerging markets meltdown in the works, there’s a ton of uncertainty swirling around the market right now.

So much so, that it’s hard to prevent our emotions from taking center stage and interfering with our investment decisions.

Since our emotions tend to mislead us, though, it’s important to rely on the one thing that never lies instead.

And that’s data!

To help us in this quest, we reached out to the undisputed champion of data tracking for the S&P 500 Index – Howard Silverblatt.

He’s the Senior Index Analyst at S&P Dow Jones Indices. And ever since taking the position in 1997, every major financial publication in the world has come to rely on his timely insights. (If you don’t believe me, just Google him.)

The Wall Street Journal actually calls him the “High Priest of Stats.”

In our exclusive interview, he demonstrates precisely why he’s a “go-to” source. He reveals…

• A “big drop” that we should expect right after Thanksgiving.

• Two records that S&P companies keep breaking.

• One type of stock we’ll want to own if the market happens to succumb to any of the uncertainties above (and hit the skids).

• Two big changes coming to the Fed that we need to factor in to the timing of the taper.

• A surefire stock bubble indicator. (Hint: It’s not flashing any warning signs, even though September is usually the worst month for stocks.)

He even shares a few data points from his most recent research on small caps, which hasn’t even been published yet.

To hear it all for yourself, simply click on the image below. Or you can read the transcript here.

Ahead of the tape,

Louis Basenese

P.S. Speaking of interviews… Tomorrow at 2:37 PM EST, I’ll be joining John Ransom, Finance Editor for Townhall Finance, to discuss what the latest market trends mean for investors. The interview will be broadcast on 30 different radio stations throughout the country. The easiest way for you to gain access, however, is by going here after the show. Be sure to tune in!

The post Keynote Speaker Series: Howard Silverblatt, Senior Index Analyst At S&P Dow Jones Indices appeared first on Wall Street Daily.

Article By WallStreetDaily.com

Original Article: Keynote Speaker Series: Howard Silverblatt, Senior Index Analyst At S&P Dow Jones Indices

Today, the United European Currency tested week high of 1.3280. However, the pair was not strong enough for further upward movement thus it came back to lows. 

By Profit Confidential

When retailers in the U.S. economy warn about their sales being in a slump or start to forecast rough roads ahead, it should be a warning to investors of an economic slowdown ahead. The logic behind this is very simple: Retailers in the U.S. economy show trends about consumer spending; if retailers are worried, it means consumer spending is in trouble.

One way to get an idea about bleak consumer spending is by looking at what happens during the peak buying seasons. In the most recent peak buying season, being the back-to-school shopping season, retailers in the U.S. economy were only able to lure in customers by slashing their already low prices.

The president of Retail Metrics (a company that provides estimates of same-store sales), Ken Perkin, said, “They [discounts] seem to be above the norm. That was emblematic of just the lack of demand for back-to-school.” (Source: “U.S. retailers rely on deep discounts to win back-to-school shoppers,” Reuters, September 5, 2013.)

In the very recent past, we have heard from retailers like Wal-Mart Stores, Inc. (NYSE/WMT) and Macy’s, Inc (NYSE/M) about how they are struggling with their sales. And that’s a problem when you have both low-end and higher-end retailers facing similar customer demand issues.

The Cato Corporation (NYSE/CATO) is an apparel and accessory chain founded in 1946. The company reported its same-store sales in August were down two percent compared to the same period a year ago. The CEO of the company, John Cato, said, “August same-store sales were within our range of expectations and consistent with our current trend. We remain cautious in regard to the remainder of the year.” (Source: “Cato Reports August Same-Store Sales Down 2%,” The Cato Corporation web site, September 5, 2013.)

While retailers face soft—and in some cases, declining—demand in consumer spending, I have another concern that doesn’t get much mainstream attention: how the pullback in consumer spending will impact the American jobs market.

Since the beginning of the so-called recovery, we have seen a spur in retail jobs. If we start to see retailers post poor sales because consumer spending is in a slump, jobs created in the low-paying sector will diminish as quickly as they were created.

It’s very simple: we can’t have economic growth in the U.S. economy until the average American Joe starts to spend. When he spends, it creates jobs and it keeps the economic cycle rolling. As I have mentioned many times in these pages, consumer spending makes up more than two-thirds of the U.S. gross domestic product (GDP)—that’s why it’s so important that consumers spend.

Retail stocks are a leading economic indicator. When I look at the retailers today, I see a declining trend in their prices. One of my favorite leading indicator retail stocks to watch is The Gap, Inc. (NYSE/GPS). Its stock price is down roughly 13% off its August highs—not good news at all for this sector.

Article by profitconfidential.com

By Profit Confidential

The way things are going, the place to be in capital markets seems to be in energy. Oil and gas stocks, particularly smaller ones, continue to be solid earners in a stock market looking for direction.

While oil prices gyrate on geopolitical events, market speculators have been bidding the commodity based on the slightly positive tone in U.S. economic data. It doesn’t take a lot for market participants to bid oil. The only way to beat it as a consumer is to own a piece of the company.

While many junior oil and gas producers are moving higher in value on the stock market, valuations are particularly lofty. They were high to begin with, before recent events in Syria, but they have only gotten worse. Now isn’t particularly a good time to be considering new positions on the stock market, but the energy sector is a bright light in an otherwise lackluster environment.

Jim Rogers, the “Investment Biker,” wrote that he would continually analyze all capital markets, but trade very little. He would wait until an investment opportunity became so compelling, and then take on a considerable position (with leverage).

I don’t see this kind of opportunity with oil, but I do see it in natural gas as a longer-term, cyclical play after the natural gas build-out is completed.

One of the most successful natural gas  producers on the stock market has been Cabot Oil & Gas Corporation (COG). Even with flat natural gas prices, this oil and gas producer is up four-fold since the beginning of 2010. Its valuation is super lofty, but then again, this enterprise is delivering on its promises. Second-quarter 2013 production grew 52% to 95.2 billion cubic feet. Earnings grew 148% to $89.1 million. The number was actually higher save for a few one-time items.

There’s a lot to be said, in my view, for a company like Chart Industries, Inc. (GTLS), which offers a way to play the natural gas build-out. The company works with oil and natural gas producers to create storage solutions for hydrocarbons. This enterprise is growing, its management team is diligent in the way the company expands, and the stock is also selling to China, where there is a voracious appetite for energy storage solutions.

Chart Industries is a mature business, but it generated second-quarter revenues of $298.3 million for a solid gain of 24%.

The company’s order backlog is at a record $664 million. Second-quarter earnings were $20.0 million compared to $17.9 million.

Chart Industries is selling product to PetroChina Company Limited (PTR). The company just announced another $50.0-million order on top of a $45.0-million order for self-contained liquefied natural gas station modules.

The company’s second-quarter earnings result beat consensus, and while 2013 revenue expectations are still the same, Chart Industries boosted its bottom-line forecast for the year. (See “How to Play the Bakken Oil Boom While Oil & Gas Companies Are at Their Highs.”)

In terms of a multiyear investment theme, I’d seriously consider some sort of exposure to natural gas. But it doesn’t have to be a pure play producer like Cabot Oil & Gas. A company like Chart Industries would be a worthy addition for long-term portfolios on a major price retrenchment.

Article by profitconfidential.com

By Profit Confidential

If you like taking some risk but also love the idea of making some good price appreciation, then read on, as there are alternative ways of earning dividend income without having to buy General Electric Company (NYSE/GE) or The Procter & Gamble Company (NYSE/PG).

Recently, I talked about some smaller dividend paying stocks, such as Och-Ziff Capital Management Group LLC (NYSE/OZM), with a dividend yield of 5.3%, and Fortress Investment Group LLC (NYSE/FIG), with a dividend yield of 3.3%, which you can read more about in “The Benefits of Lesser-Known Small-Cap Dividend Stocks.” Yet these dividend paying stocks are more conservative and offer less upside price appreciation potential.

If you want a bit more risk along with the dividends, there are other small-cap dividend paying stocks available.

Many of these dividend paying stocks are found on the small-cap Russell 2000 index, which has an average dividend yield of 1.29%.

World Wrestling Entertainment, Inc. (NYSE/WWE) has been a big dividend payer with a dividend yield of 4.9%. It’s likely not on your radar unless you happen to watch WWE wrestling. (You know the fake wrestling. No, it’s not real.) The fact is the WWE has a significant global following and reported over $1.0 billion in revenues in 2012. While paying out an excellent dividend yield, the stock is also up 15.9% over the past 52 weeks and is outperforming the S&P 500.

Chart courtesy of www.StockCharts.com

PetMed Express, Inc. (NASDAQ/PETS) is the largest pet pharmacy in the United States. The company sells prescription and non-prescription pet medications, along with other health products for pets. The company just increased its quarterly dividend to $0.17 for a dividend yield of 4.5%. The stock has advanced an impressive 47% over the past 52 weeks, easily beating the S&P 500.

Chart courtesy of www.StockCharts.com

Knoll, Inc. (NYSE/KNL) makes workplace and residential furnishings that have won multiple awards. Trading at 13.64X its estimated 2014 earnings per share (EPS) of $1.13 and with a price-to-earnings growth (PEG) of 0.48, the stock has excellent value. Knoll has underperformed the S&P 500, gaining 1.46% over the last 52 weeks, but the upside capital appreciation potential is huge, and you can still earn a nice 3.2% dividend yield.

Chart courtesy of www.StockCharts.com

In the biotech area, Meridian Bioscience, Inc. (NASDAQ/VIVO) researches, manufactures, and sells diagnostic test kits, purified reagents, and other products. The kits are used for such medical conditions as gastrointestinal, viral, and respiratory infections. Sales are to hospitals, laboratories, research centers, diagnostics manufacturers and biotech companies in over 60 countries. Meridian has good upside and pays a 3.4% dividend yield. You would have also beaten the S&P 500 as the stock advanced 27% over the past 52 weeks.

Chart courtesy of www.StockCharts.com

Article by profitconfidential.com

By Profit Confidential

The U.S. national debt has increased significantly over the last few years, especially after the credit crisis struck the U.S. economy.

To stop the economy from totally collapsing, the U.S. government incurred several trillion-dollar budget deficits in a row as it spent to revive the economy. As yearly budget deficits piled on, the U.S. national debt rose. Today, the U.S. economy has the biggest debt in monetary terms than any other country in the global economy. In fact, if you add together the national debt of Greece, Spain, Portugal, and Japan, collectively, their debts are less than the national debt of the U.S. economy.

What happens next?

At present, the U.S. government is making payments on its old debt by simply borrowing more debt. Hands down, this is the biggest Ponzi scheme in play. But as I have written before in these pages, our national debt-to-gross domestic product (GDP) is only 105%. In Japan, the national debt-to-GDP is 205%. Hence, if we follow Japan’s example, our debt could double from here.

The U.S. government should hit its debt limit in October. And Congress will increase that debt limit as it always does.

Eventually, the only way to reduce the national debt, especially if interest rates rise, is to raise taxes. But it is a double-edged sword. Raise taxes and you stifle the U.S. economy, as higher taxes negatively affect consumer spending. Don’t raise taxes and you still have a problem with a mounting national debt.

Will the U.S. come out with some law that if a group of citizens or a corporation has a certain amount of cash, they will get a special tax assessment on capital? This action makes more sense than an across-the-board tax increase.

It happened in Cyprus. Now we hear something similar is being done in Poland. To help its national debt situation, the Polish government has decided on reforms that move bond assets from private to state funds. Private pension funds are saying the move is unconstitutional. Crazy, but true; this is what is happening in Poland. (Source: Reuters, September 4, 2013.)

In the case of the U.S., I don’t think we have to worry about special tax assessments right now. They will be a thing of the future, not today. If we follow Japan’s route—and it looks like we are—we can add another $15.0 trillion in debt before the government gets desperate (save and except sharply higher interest rates or a total collapse in the value of the U.S. dollar).

Article by profitconfidential.com

By Profit Confidential

In these pages, I have written extensively on how central banks will ultimately be the ones who drive gold bullion prices much higher. The phenomena of these banks getting back into gold (after they were net sellers for years) started in mid-2009.

The chart below clearly shows the rise in gold bullion reserves held by central banks across the global economy; its trend is quite impressive, even for a gold bug like me.

Central banks’ gold reserves have increased about 6.4% since the first quarter of 2008 to the first quarter of 2013. (Source: World Gold Council, last accessed September 6, 2013.) While on the surface that sounds like a small number, the actual increase is 1,717 tonnes of gold—equal to about 64% of the total amount of gold produced annually.

And the buying continues. In the second quarter of this year, central banks bought more gold. They purchased 71 tonnes of the yellow metal. (Source: World Gold Council, August 15, 2013.)

Why are these banks running towards gold bullion? It’s because they are getting out of U.S. dollars as their reserve currency. The chart below tells that story.

This chart is something gold bears refuse to acknowledge. It shows the percentage change from a year ago in U.S. dollar reserves at central banks around the world. You can see how, since 2007, the U.S. dollar has become less of a reserve currency for these banks.

The actions of the central banks, in buying more gold bullion and getting away from the U.S. dollar as their reserve currency, speaks louder than words—and the two charts above just give me more ammunition to be bullish on gold bullion.

Michael’s Personal Notes:

The U.S. national debt has increased significantly over the last few years, especially after the credit crisis struck the U.S. economy.

To stop the economy from totally collapsing, the U.S. government incurred several trillion-dollar budget deficits in a row as it spent to revive the economy. As yearly budget deficits piled on, the U.S. national debt rose. Today, the U.S. economy has the biggest debt in monetary terms than any other country in the global economy. In fact, if you add together the national debt of Greece, Spain, Portugal, and Japan, collectively, their debts are less than the national debt of the U.S. economy.

What happens next?

At present, the U.S. government is making payments on its old debt by simply borrowing more debt. Hands down, this is the biggest Ponzi scheme in play. But as I have written before in these pages, our national debt-to-gross domestic product (GDP) is only 105%. In Japan, the national debt-to-GDP is 205%. Hence, if we follow Japan’s example, our debt could double from here.

The U.S. government should hit its debt limit in October. And Congress will increase that debt limit as it always does.

Eventually, the only way to reduce the national debt, especially if interest rates rise, is to raise taxes. But it is a double-edged sword. Raise taxes and you stifle the U.S. economy, as higher taxes negatively affect consumer spending. Don’t raise taxes and you still have a problem with a mounting national debt.

Will the U.S. come out with some law that if a group of citizens or a corporation has a certain amount of cash, they will get a special tax assessment on capital? This action makes more sense than an across-the-board tax increase.

It happened in Cyprus. Now we hear something similar is being done in Poland. To help its national debt situation, the Polish government has decided on reforms that move bond assets from private to state funds. Private pension funds are saying the move is unconstitutional. Crazy, but true; this is what is happening in Poland. (Source: Reuters, September 4, 2013.)

In the case of the U.S., I don’t think we have to worry about special tax assessments right now. They will be a thing of the future, not today. If we follow Japan’s route—and it looks like we are—we can add another $15.0 trillion in debt before the government gets desperate (save and except sharply higher interest rates or a total collapse in the value of the U.S. dollar).

What He Said:

“I’ve been writing to my readers for the past two years claiming the decline in the U.S. property market would not be the soft landing most analysts were expecting, but rather a hard landing. My view remains unchanged. The U.S. housing bust will be cut deeper and harder than most can realize today.” Michael Lombardi in Profit Confidential, June 13, 2007. While the popular media was predicting a bottoming of the real estate market in 2007, Michael was preparing his readers for worse times ahead.

Article by profitconfidential.com

By Profit Confidential

Many of the stock market’s leading stocks (mostly blue chips) have been pulling back recently, even in the face of rising key stock indices. This is both a telling and healthy development for a market that’s been due for a meaningful retrenchment for a long time.

While a lot of the stock market’s best-performing blue chips aren’t too far off of their highs, there’s definitely been some repositioning going on among institutional investors. This is a possible indicator that the stock market is now rotating out of its safest names that have been performing so well this year. It very much is an equity market dynamic worth following.

One of my favorite stocks for long-term investors seeking dividends is Colgate-Palmolive Company (CL). This is not a burgeoning biotechnology stock, but that’s not the point. If you can get a 10% total return, including dividends, in a year from a company that isn’t going to go broke in the next recession, well, that’s meaningful for a stock market investor who is saving for or is already in retirement.

Colgate-Palmolive is five points off its all-time record high set in May of this year. The stock’s current dividend yield is 2.4%, and its trailing price-to-earnings (P/E) ratio is 24, which many may argue is pricey.

This is a company that has a long-term track record of solid business execution and not surprising Wall Street on the downside. It’s the kind of company worth considering on major retrenchments.

Another favorite of mine for long-term stock market investors is PepsiCo, Inc. (PEP). It’s a better business than The Coca-Cola Company (KO), even if you prefer the taste of “Coke.”

PepsiCo has been a much more consistent company in terms of its share price performance compared to Coca-Cola. It’s also a more consistent earner, and while it’s not the fastest mature enterprise in the landscape, its track record of wealth creation including dividends is undeniable. (See “Two Important Factors Now Working Against Stocks.”) It’s a company that I think will keep on delivering on its promises. Soda and snacks continue to be a very good business.

Finally, one of my favorite benchmarks is still Johnson & Johnson (JNJ). Like many blue chips, this pharma healthcare company has experienced long periods of nonperformance on the stock market. After a sustained period of wealth creation (and this doesn’t account for dividends) in the late 1990s and early 2000s, the company traded range-bound from 2005 until 2012. Then the stock accelerated tremendously to its current level.

Johnson & Johnson is eight points off its record high set in mid-July. It has been one of the stock market’s best wealth creators in the large-cap space, and it remains, in my view, a company worth accumulating when it’s down in price.

I find the price retrenchment among many of the stock market’s leading blue chips to be a meaningful development. Combined with a reduction in quantitative easing, it’s a signal that this stock market is about to experience a change in trend.

Article by profitconfidential.com

By Profit Confidential

At a time when the smartphone war is picking up, former Wall Street star BlackBerry Limited (NASDAQ/BBRY) is running for the exit as fast as it can. The company is expected to be sold in some form by November, as it tries to unload its issues on another company.

The stakes are high and extremely competitive. BlackBerry finally realized this. Hewlett-Packard Company (NYSE/HPQ) realized this early and vaulted from the tablet market; albeit, it’s still developing a higher-end tablet geared toward companies. Since its decision, Hewlett-Packard (HP) has doubled in price and fared much better than I previously thought it would.

Microsoft Corporation (NASDAQ/MSFT) is proposing to acquire the cell phone business of another former Wall Street darling, Nokia Corporation (NYSE/NOK), to take a run at market leaders Apple Inc. (NASDAQ/AAPL) and Samsung Electronics Co. Ltd. (Read “Why I Like Microsoft’s Proposed Acquisition of Nokia’s Cell Phone Business.”)

So, we now have a three-party battle for smartphone and tablet supremacy.

Apple dominates the U.S. market and continues to make the most attractive products that consumers will line up overnight to get their hands on. The next-generation “iPhone” will be launched tomorrow to great anticipation. (I’m actually looking forward to it, and may upgrade my old “iPhone 4.”)

Of course, Apple is also expected to launch a cheaper plastic “iPhone 5” version that will cater to those who can’t afford the hefty price tag not only in America, but in the emerging markets as well. If Apple, can get its smartphones sold in China (it’s already had talks), it could be a massive game-changer for the company and could really add some spark to a stock that has been looking for love.

Samsung dominates the emerging markets, but the field will likely get crowded with Nokia getting a push from Microsoft and the addition of a cheaper iPhone.

If Microsoft can close its acquisition of Nokia, it would jump to third place, but with tons of work to do. While it will not be easy, I wouldn’t be ruling out Microsoft, with its vault of cash ready to drive its mobility sector. The Nokia “Lumia” phone, which uses the “Windows” mobile platform, is not that bad; with some changes and tweaks, it could take a run at the market leaders. For Microsoft, Nokia is currently huge in the emerging markets due to the low cost of its devices, so this is a key advantage for the company—that is, unless Microsoft somehow screws it up and decides to jack up its prices.

As for BlackBerry, its time has come. The products are still very good, but it needs a new owner who can somehow turn things around and get the former leader back in the race.

Article by profitconfidential.com

Source: Peter Byrne of The Metals Report (9/10/13)

http://www.theaureport.com/pub/na/david-franklin-is-platinum-the-new-gold

The Goldrums of June are giving way to a new dawn for platinum group metals, says David Franklin, a market strategist at Sprott Asset Management. While white metal miners face a variety of challenges, there is an increasing demand for platinum and palladium from vehicle manufacturers in the U.S. and China. And supplies of the hard-to-find metal are vanishing day by day. Now is the time to buy into existing stockpiles of the precious metal, Franklin tells The Metals Report.

The Metals Report: David, can you give us your recap on gold’s recent performance?

David Franklin: During the first half of the year, gold companies booked large write-downs to assets, which they had purchased earlier in the cycle at inflated values. Then, Bernanke mentioned a potential reduction in stimulus from the Federal Reserve, which prompted U.S. hedge funds to sell large positions in gold. Soros, Paulson and Daniel Loeb each sold a large chunk of their holdings. There was just a huge amount of bad news in the whole precious metals sector and it was all priced in by the end of June.

TMR: Are precious metals in the midst of a true comeback?

DF: We have turned a corner and are now recovering as the market rebalances. The good news is that gold and silver are up more than 20% from their June bottoms. We still have huge demand for physical metal as evidenced by depleting inventories at the COMEX.

TMR: How are the junior gold miners doing?

DF: Look at the GDXJ, which is an index of junior miners: Gold stocks have recovered somewhere north of 30%. The GDX, which is an index of senior miners, has recovered in the neighborhood of 20%. Gold stocks have more than rebounded since the horrible June lows.

TMR: What qualities do you look for when assessing precious metal miners?

DF: First and foremost, I look at the company managers. I put a premium upon an executive’s previous success within the industry. That is more important to me than his or her ability as a geologist or as a mine builder. Secondly, I independently assess the merits of the company’s deposits, and whether a mine has a good chance of showing a profit. There are so many deposits out there that cannot become profitable. The third item I look at is the firm’s access to capital. Can it raise enough money to actually build a mine and bring it into production? Frankly, finding all of these qualities together in one company at the same time is a very rare combination.

TMR: How do platinum group metals fit into the overall precious metals market in terms of industrial demand and other uses?

DF: In dollar terms, PGMs are the smallest of the precious metal markets, and these metals are used differently than gold. For example, gold is a monetary metal and very little of it is used by industry. Most platinum and palladium is consumed by industrial processes, but it is still considered a precious metal.

TMR: What is the difference between platinum and palladium in terms of use?

DF: Both platinum and palladium are used in catalytic converters, which remove carbon dioxide and some of the smog producing gases from internal combustion engines. However, platinum has a higher melting point and can be used in hotter burning engines, like diesel cars. Engines with lower operating temperatures, such as gasoline cars, can use palladium in their converters. Right now, palladium is about half the price of platinum.

TMR: What is the global supply and demand outlook for platinum group metals?

DF: South Africa is a very significant player in gold mining, and an even more significant player in platinum mining. More than 70% of the world’s platinum comes out of South Africa. Right now, South Africa is entering its biannual labor negotiations and tensions are very high. The gold and platinum mining companies have offered their workers a 5% increase in wages. Depending on the particular union, the workers are demanding a doubling of wages or a 60% increase—and are threatening to strike. You can imagine how a strike could impact the price of gold, and to a lesser extent the price of platinum. Last year, the platinum price increased by 15% after striking miners were shot and killed in South Africa by government forces.

TMR: Will the new South African Mineral and Petroleum Resource Amendments make a positive or a negative impact on the current state of mining in South Africa?

DF: After the violence last year, the mining companies and the government are both trying to reach better terms with the unions. There are rumors that South Africa would consider nationalizing the mining assets. Some people in the government have been spouting this view for years now. It is remains a very volatile political environment, and any potential changes can be significant.

TMR: Why, geologically, is platinum concentrated in South Africa?

DF:. Vast quantities of molten rock from the earth’s mantle were brought to surface through long vertical cracks in the earth’s crust, huge intrusions created the geological intrusion known as the Bushveld Igneous Complex. Those metal veins are very thin. That makes it very difficult to do highly mechanized mining, which generates a lot of waste ore and a very small amount of platinum and palladium. Consequently, PGM miners do not rely upon mechanization, like trucks and other mining equipment. They dig the metal out by hand while lying on their backs in very cramped and hot conditions. It is impossible to get mechanized equipment into these narrow mine shafts. This method of mining is very expensive because of the amount of manual labor needed.

Consequently, at current platinum prices, about 60% of the mining industry in South Africa is not making a dollar producing platinum. The cost of producing platinum is about $1,800 per ounce ($1.8K/oz), but the market price is in the $1,400/oz range. Because the miners are losing money, they are not investing in their mines, which are increasingly in poor conditions. The bottom line is that investors should buy the metal itself.

TMR: What companies do you cover in the Bushveld region?

DF: Ivanhoe Mines Ltd. (IVN:TSX) [formerly Ivanplats (IVP:TSX)] has made an unbelievable discovery in a previously unexplored area of the Bushveld. Robert Friedland, a long-time Canadian miner, is the founder and executive chairman. The company has found a previously undiscovered deposit of platinum that can be mined mechanically! Ivanhoe will be able to mine platinum at a fraction of its current cost of production. This reformation is one of the best deposits of platinum in the world; it could have a huge impact on the platinum market.

TMR: What makes it unusual?

DF: The Platreef project includes a recently discovered underground deposit of thick, PGE-nickel-copper mineralization in the Northern Limb of the Bushveld Complex, approximately 280 kilometres northeast of Johannesburg. Many platinum mines chase deep underground veins that are very narrow. The platinum in Friedland’s reformation is highly concentrated, with thick veins of the metal close to the surface. It can be mined using the open-pit method, which is very cheap and unlike any other deposit in the complex.

TMR: Could Russia contribute significantly to global PGM supply?

DF: Russia does not have any labor issues, per se, but it has other problems that are impacting the palladium market. Norilsk Nickel (GMKN:RTS; NILSY:NASDAQ; MNOD:LSE) is one of the largest mining companies in Russia and it owns a nickel deposit with a palladium byproduct. Norilsk had been stockpiling the palladium from this deposit and regularly selling it on the world market. But last year, Norilsk confirmed that its palladium stores are almost depleted. That supply had been a huge overhang on the market.

TMR: What’s demand look like for palladium?

DF: The primary use of palladium is in catalytic converters for cars. North American automobile production is the highest its been since 2007. Chinese car production is hitting all-time highs, with 10%, 20%, and 30% increases year-over-year. As above-ground stores deplete, the price will walk higher. Interestingly, a company recently launched a platinum ETF in South Africa and demand exploded. So now there is the concern about the diminished Russian supply, and concern that there is not enough palladium being mined in South Africa to meet increasing investment demand from ETF investors.

It’s pretty close to a perfect storm in the palladium space.

TMR: Are there platinum miners outside of South Africa?

DF: At Sprott, we like Prophecy Platinum Corp. (NKL:TSX.V; PNIKF:OTCPK; P94P:FSE). It is located in Canada, which is a much safer jurisdiction than South Africa. It is exploring a deposit that had previously been mined by several other companies. The deposit contains very high concentrations of nickel, platinum and palladium. Prophecy has a shot at turning that project into a good mine.

TMR: Prophecy’s stock price hasn’t been doing that well in the last year. Is there an explanation for that?

DF: Prophecy published a preliminary economic assessment saying that it would cost $500–600 million to start building its mine. Everybody said, “Wow, that’s a lot of money.” We are living in a capital constrained world, right now. Frankly, the same thing has happened to Ivanplats. It has been a rough year for anyone who is not already producing.

TMR: Do you see that situation turning around during the next few years?

DF: We see an uptake in platinum and palladium prices. Price increases will mostly emanate from supply depletion. There are a number of other catalysts tied to this pricing trend, including some of these companies shutting down production. There is a clear increase in demand and there are very few substitutes for the platinum metals in industrial processes. Coming into the halfway point of this year, palladium was the top performing precious metal. Gold is catching up fast, but the fundamentals are very strong for investing in palladium and platinum ETFs.

TMR: Thanks for joining us today, David.

DF: Take it easy, Peter.

David Franklin joined Sprott Asset Management Inc. in 2008 as a research analyst focusing on equity research within the precious metals and materials sectors. In April 2009, Franklin became the co-author of the monthly “Markets at a Glance” articles with Eric Sprott and subsequently became “Market Strategist” in February 2010. He was named CEO of Sprott Private Wealth in March 2011 and oversaw the business unit of Sprott that provides wealth management services to high-net worth individuals, foundations and trusts. In January 2013, Franklin returned to Sprott Asset Management as market strategist.

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