InvestMacro Forex News

By www.CentralBankNews.info     New Zealand’s central bank held its Official Cash Rate (OCR) steady at 2.5 percent, as widely expected, and repeated that it expects to keep the rate “unchanged through the end of the year.”
    The Reserve Bank of New Zealand (RBNZ) also repeated that the New Zealand dollar remains overvalued despite having fallen over the past few weeks and continues to cause headwinds for the tradeables sector, restricting export earnings and encouraging demand for imports.
    In April the RBNZ, which has held its policy rate steady since March 2011, also said it expected to keep the OCR rate steady through this year and that the currency, known as the kiwi, was overvalued.
    The kiwi bottomed out in March 2009 against the U.S. dollar at $0.49 and has been rising steadily since then, hitting $0.83 at the beginning of this year. But since early May the kiwi has been falling from $0.85 to below $0.80 today. The RBNZ has confirmed it has intervened in markets.
    The RBNZ said economic growth was picking up but remained uneven with consumption rising and reconstruction in Canterbury gathering pace and this will be reinforced by a broader recovery in construction, helping support overall activity and eventually easing the housing shortage. Fiscal consolidation, however, will also constrain demand.
    “As previously noted, the Reserve Bank does not want to see financial or price stability comprimised by housing demand getting too far ahead of the supply response,” the bank said, quoting its governor, Graeme Wheeler.

    The RBNZ said its expects annual Gross Domestic Product growth to accelerate to about 3.5 percent by the second half of 2014 and inflation to rise toward the midpoint of the bank’s 1-3 percent target.
    New Zealand’s inflation rate was stable at 0.9 percent in the first quarter, the same as in the fourth quarter and only marginally higher than 0.8 percent in the third quarter.
    New Zealand’s Gross Domestic Product rose by 1.5 percent in the fourth quarter from the third quarter for annual growth of 2.5 percent, up from 2.0 percent in the third quarter.

    www.CentralBankNews.info

By The Sizemore Letter

I first saw the Panama Canal in action in 2002.  Though nearly 90 years old at time (and soon to be 100 years old at time writing), it was an impressive piece of engineering to behold even by modern standards.  A series of locks lifts ships 85 feet above sea level and then lowers them again on the other side.  And it does it through some of the least hospitable terrain on the planet.

You absolutely cannot underestimate the importance of the Panama Canal to the modern global economy.  The existence of the Canal has done more to promote free trade and globalization than all of the international summits in history.  It has massively reduced costs and transit times and allowed for much tighter economic integration between the countries of the Americas and between the Americas and the Old World.

The Canal currently handles about 5% of all worldwide shipping traffic—and it would be substantially higher were it not for the fact that the Canal is currently running at maximum capacity, pending the opening of a new, wider lane set to open in 2014.  The new lane will accommodate significantly larger ships and is expected to double the Canal’s current capacity.

Note: The Canal is something that would make any red-blooded American proud.  It was started by the French—who ended up giving up on it due to engineering difficulties and a high mortality rate for their workers.  It took American innovation and engineering prowess to get the job done.

Proposed Nicaragua Canal Route

Yet recent moves by China add a new wrinkle to this story.  Even while the capacity of the Panama Canal is being doubled, a Chinese company is in serious discussions with the Nicaraguan government to build a rival canal.

The cost?  $40 billion and 11 years of construction.

Based on economics alone, it’s hard to understand the Chinese motivation.  Panama nets about $1 billion per year in tolls on its Canal and has the ability to undercut any potential rival on price.  The Canal expansion—which, again, doubles capacity—cost just $5.2 billion.

China may be betting that world trade will be high enough to justify two Central American canals by the year 2025, but I believe their motivation is less economic and more geopolitical.

The Panama Canal has been under the control of the Republic of Panama since 1999.  But under the original treaties, negotiated by the Carter Administration, that ceded control to Panama, the United States retained a permanent right to defend the Canal if its openness and neutrality were ever at risk.  The Canal may belong to Panama, but the United States still considers it a vital asset necessary for national defense.

Could China have similar motives in Nicaragua?  It would appear so to me.

In Nicaragua, China has the potential to essentially bribe one of the poorest countries in the Western hemisphere into being a loyal ally.  By some estimates, a new canal could double the country’s GDP per capita.  And Nicaragua is not a country known for being friendly to the United States.

Will the canal happen?  Maybe, maybe not.  We’ll see.  But if it does, it should benefit the world economy by increasing capacity, speeding up transit times, and, presumably, forcing Panama to lower its tariffs in order to compete.

SUBSCRIBE to Sizemore Insights via e-mail today.

By www.CentralBankNews.info

By www.CentralBankNews.info     The Central Bank of Iceland held its benchmark seven-day collateralised lending rate steady at 6.0 percent and repeated that its accommodative policy stance would have to be tightened as spare capacity in the economy disappears with the degree of normalization hinging on inflation.
    The central bank, which has maintained rates this year after raising them by 125 basis points in 2012, said the outlook for inflation had changed little since its May forecast and underlying inflation and expectations had declined but remained above the bank’s inflation target.
    Iceland’s inflation rate was unchanged at 3.3 percent in May and April, above the bank’s 2.5 percent target. In May the bank forecast that inflation would hit its target in the first half of 2014.
    Iceland’s economic growth appears to have been somewhat weaker than the bank forecast in May’s monetary bulletin, but the central bank said it was too early to “asset that the growth outlook for the whole year has deteriorated” as output figures are often revised upwards and the most recent indicators suggest that the economic recovery is developing broadly in line with forecasts.
    In May the central bank cut its 2013 growth forecast to 1.8 percent from a previous 2.1 percent due to weaker than expected investment. In 2012 the economy expanded by 1.6 percent.

    Iceland’s Gross Domestic Product was estimated to have expanded by 4.6 percent in the first quarter, up from 0.5 percent in the fourth quarter, for annual growth of 0.8 percent, down from 1.4 percent in the fourth quarter.
    In May the central bank had forecast first quarter annual growth of 1.5 percent.
    For 2014 the bank has forecast growth of 3.0 percent and for 2015 growth of 3.5 percent.
    The exchange rate of the Icelandic krona has been broadly unchanged since the last meeting by the central bank’s monetary policy committee in May and the bank said its “intervention policy formula” appears to have contributed to “greater exchange rate stability and is therefore conducive to providing a firmer anchor for inflation expectations and promoting more rapid disinflation that would occur otherwise.”
    At the May meeting the krona was quoted at 122.9 to the U.S. dollar and today it was quoted higher at 120.5, up 4 percent since the start of the year when it was trading at 128 to the dollar.
    In May the central bank said it would take a more active role in the foreign exchange market to reduce fluctuations and the current exchange rate level was sufficient to bring inflation back to target.
    Prior to the global financial crises, the krona was roughly twice a strong at around 60 to the U.S. dollar but Iceland’s three largest banks collapsed in 2008 and currency controls were imposed in November 2008 to the protect the krona after it plunged in mid-2008.
    Iceland’s new government plans to unveil by September a plan on how to ease currency and capital controls that is likely to include some restrictions to avoid that $8 billion of funds trapped in the country don’t suddenly disappear, leading to another plunge in the krona. Iceland has already asked creditors in the three banks to forgive some $3.6 billion.
    Iceland’s central bank appealed to the new government to bring its finances into balance as soon as possible so the policy mix can contribute to the country’s external balance, economic stability and help bring inflation close to target “at the lowest possible cost.”
    “It is still the case that as spare capacity disappears from the economy, it is necessary that slack in monetary policy should disappear as well,” the central bank said, repeating a phrase that is has used for many months.
    It added that the degree to which such normalisation takes place through changes in central bank rates will depend on on inflation, which in turn depends on wages and the exchange rate.

    www.CentralBankNews.info

London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 12 June 2013, 08:45 EDT

GOLD PRICES hovered just below $1380 an ounce Wednesday morning in London, with silver trading around $21.80, after the metals failed to break through $1380 and $22 respectively.

European stock markets ticked higher by lunchtime – with the exception of Germany’s DAX – regaining some of yesterday’s losses, which were followed by sell offs in the US and Asia.

Commodities ticked higher this morning while US Treasury bond prices fell ahead of an auction of 10-year debt later today.

“The gold price is unable to recover despite a weaker US Dollar and falling equity markets,” says this morning commodities note from Commerzbank.

“The dominant subject on the gold market continues to be the possibility of a premature withdrawal of bond purchases by the US Federal Reserve…in our view, the figures available so far do not constitute any reason to scale back QE3 in the near future.”

“There’s a tug of war between investors putting money into gold and taking it out,” adds Bernard Sin, head of currency and metal trading at Swiss refiner MKS, who also cited concerns among investors “worried about is if there’s no more quantitative easing”.

“With the Chinese out [on holiday] until Thursday,” adds a note from ANZ, “the [gold] market is lacking a key stabilizing factor.”

Since falling sharply in April, gold has swung either side of $1400 an ounce, with the gold price falling as low as $1337 and as high as $1478. Silver has also oscillated, while stock markets have retreated after hitting multi-year, or in some cases record, highs last month, with Japan’s Nikkei especially hard hit.

“We think the recent volatility can be mostly traced to [Fed] Chairman Bernanke’s rather unconvincing testimony in front of Congress a few weeks ago when he failed to clarify exactly when the Federal Reserve’s bond buying program will be pared back,” says a note from INTL FCStone metals analyst Ed Meir.

“Markets have been on edge ever since, with the global bond market in particular getting hammered.”

An auction of 10-year US Treasury bonds later today is set to see benchmark yields above the inflation rate for the first time in 18 months, the Financial Times reports.

The market yield on 10-year Treasuries has risen from 1.6% at the start of last month to nearly 2.3% yesterday. Treasury Inflation Protected Securities (Tips), the price of which is linked to inflation, have also seen yields rise sharply in recent weeks. Bond yields move inversely to bond prices, with rising yields indicating investor selling.

“We have known for some time that Tips were overvalued, and the reversal has happened very quickly,” James Evans, senior vice president at Brown Brothers Harriman, tells the FT.

“Rightly or wrongly, the bond market has pulled forward the end of QE and rate hikes coming as early as 2014. It does seem premature.”

“The bond market seems to be missing the point that the Fed’s policy of tapering [i.e. slowing the pace of QE asset purchases] depends on the tone of economic data,” adds Barclays interest rate strategist Michael Pond.

“The market has moved from pricing in less bond buying [by the Fed] to a full-on tightening cycle and we believe that is a different story than what the Fed is trying to communicate.”

“Recent weeks suggest that transparency [from the Fed] doesn’t mean clarity,” says Jim O’Neill, former chairman at Goldman Sachs Asset Management, in a column for Bloomberg View.

“The Fed can talk about ‘tapering’ QE all it likes; it can’t change the basic laws of economics and valuation. A rise in the benchmark yield to 4% would represent normality even if inflation expectations stayed well controlled.”

“While it might be easier to detail the ‘deserved’ casualties of the last month, or more, finding the undeserved casualties might not be quite so obvious,” says this morning’s note from the currencies team at Standard Bank.

“In our view these are assets where the selling has been more a function of position unwinding than any significant change in the fundamentals that underlie the market.”

India’s government does not see the need for any further measures to restrict gold imports, according to the country’s economic affairs secretary Arvind Mayaram.

India, the world’s biggest gold buying nation, raised import duties on gold to 8%last week, and has imposed restrictions on importing on consignment.

Ben Traynor

BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Source: JT Long of The Energy Report (6/11/13) – http://www.theenergyreport.com/pub/na/15358

Looking for profits in the oil and natural gas space? Look no further than shale plays, energy service companies and offshore oil drilling opportunities in the U.S., says Byron King of Agora Financial LLC. In this interview with The Energy Report, King discusses how dwindling exports to the U.S. from Latin America, Africa and the Middle East are shifting the supply and demand equation across the world. King also names companies in the service space with solid prospects for investors.

The Energy Report: Byron, welcome. You recently attended the Platts Conference in London, which addressed shifting energy trade patterns in light of growing U.S. export prospects and dwindling exports from South America and Africa. Has OPEC’s role diminished?

Byron King: The short answer is yes. OPEC is struggling right now. The Middle East, the West African producers and Venezuela are struggling. The West African players and Venezuela have seen exports to the U.S. decline dramatically. In countries like Algeria, oil exports to the U.S. are essentially zero, while Nigeria’s exports to the U.S. are way down. The oil these countries export tends to be the lighter, sweeter crude, which happens to be the product that is increasing in production in the U.S. through fracking.

The east-to-west trade pattern for oil imports to the U.S. has essentially gone away. This does not mean that the oil goes away. It means these countries have to find new markets for their oil—which they are doing, in India and the Far East. But that disrupts trade patterns as well. Imports from the Middle East to the U.S. are falling as well. These barrels tend to be the heavier, sourer crude that U.S. refineries are geared to process.

As the U.S. imports less oil, our balance of trade gets better. The recent strengthening of the dollar has a lot to do with importing less oil. Strengthening the dollar decreases gold and silver prices, so there is some monetary blowback from the good news out of the oil patch. Strengthening the dollar increases the broad stock market for the non-resource, non-commodity and non-energy plays. There’s an astonishing dynamic at work.

TER: When it comes to countries like Venezuela, part of the reason for the decrease in exports is because it has not invested its profits in infrastructure.

BK: Good point. In Venezuela, the government has taken so much money out of the oil industry to use for social spending, military spending and government overhead that the sustaining capital is not there. Even with Hugo Chavez’s death and new leadership in Venezuela, it will require years of sustained and increased investment to get Venezuela’s output up. After 10 years of dramatically bad underinvestment, the infrastructure is worn out. It will take a lot of time, money and some seriously hard political decisions to redeploy capital inside a country like Venezuela.

TER: If OPEC can no longer control the price of oil through supply because it does not have as much control of supply, what is keeping it from flooding the market with oil to get more revenue?

BK: That would work both ways. If OPEC floods the market with more oil, it will drive the price of oil down. Then OPEC nations would get fewer dollars for each barrel. All of that extra output, if sold at a lower price, might still yield less money, which is not a good thing if you are an oil exporter and need the funds.

The big swing producer is still Saudi Arabia. Saudi has spare capacity, but I suspect not as much as it wants people to believe. It gets back to that idea of peak oil. We’ve discussed it before, and yes, I know—fracking is changing the game to some extent. But you still need to keep all the books about peak oil on your shelf. Fracking is what happens on the back side of the peak oil curve, when you need barrels, are willing to pay high prices and throw lots of capital and labor at the problem.

A country like Saudi Arabia could increase its output, but not for long and not in a heavily sustainable way. It would damage its oil fields. Beyond that, the trick for OPEC is going to be getting several countries to agree to cut output to make up for the extra output from North America, in the hope of keeping prices where they are right now.

Brent crude—which is what the posting is for much of the OPEC contracts—is about $103/barrel ($103/bbl). If OPEC wants to keep that number—or not let it fall too much further—it has to cut output, not increase output. That is a very difficult and politically charged issue within OPEC. The Middle Eastern countries can afford a minor amount of financial turmoil right now. The other OPEC countries absolutely cannot afford financial problems stemming from low oil prices.

TER: Is there informal price control going on in the shale oil fields? As the price of natural gas has dropped, the oil rig count has dropped—and once the price goes up, those oil rigs could start up again. Could there be an OPEC of North America?

BK: I do not see an organized North American OPEC because there are too many companies in the mix. Too many people have a bite at the apple for anybody to control things. It is more like a tangle of accidental circumstances driving production levels. We are seeing a slight drop in the oil rig count in the U.S. right now. Part of that has to do with the natural gas cutback, but part also has to do with the efficiency of the fracking model. Fracking can be energy inefficient, but also can be industrially efficient.

Five years ago and earlier, the idea of drilling wells was to look for oil fields. You were drilling into specific regions enriched with hydrocarbons that could flow into a well under reservoir energy or with just modest amounts of pumping or pressurization.

Today, with fracking, you are not really looking at oil fields. You are drilling into an entire formation. You are drilling into a large-scale resource and introducing energy into a formation to break up the rock and get the oil or natural gas out. To do that successfully is much more a manufacturing model than the traditional oil drilling model. This is why you see drilling pads that have room for 10 or 12 wells. You drill the wells directionally outward.

In western Pennsylvania I have seen some of the drilling maps for companies like Range Resources Corp. (RRC:NYSE). These companies have very efficient ways of corkscrewing pipe into the sweet spots of the formations with multistage fracks. They are draining the formations very efficiently. You see fewer rigs because each rig is being used in a manufacturing-type of process, as opposed to the olden days when drilling was similar to craftwork.

Modern drilling and fracking, at least in North America, is much more of an assembly line process. Companies are using the same drill pits over and over again. They are using the same drilling mud and the same fracking water. Much of the same equipment gets used multiple times on several different wells. In the olden days, each well was its own special unique construction. Of course, every oil or gas well is different, and the results depend on how you drill it.

TER: Which companies are doing this the best and are they actually making money?

BK: Five years ago, people would talk about how this well made money or how that well does not make money anymore. That’s harder to do today. The economics of the current fracking world are still up in the air.

The jury is out on many of these fracking plays. Companies are drilling a lot of wells and they are expensive. They are fracking the wells and that is very expensive. At a recent conference, a gentleman from Halliburton Co. (HAL:NYSE) said up to 50% of the different fracking stages on wells do not work. They either fail at the beginning or soon after they go into production due to many reasons—geotechnical failure; equipment failure; blockages in the holes, in the pipe, in the perforations; things like that. Once a company has put the steel in the ground, done its fracking and inserted its equipment, it is very difficult to get down there and fix what is broken.

Right now natural gas prices are so low that if a company is drilling for dry gas, it is almost a given that it is not making any money. If the company is drilling for wet gas and is producing, the gas helps pay for the investment. When you get into some of the oil plays in the Bakken formation in North Dakota, or the Eagle Ford down in Texas, you are starting to get a midcontinent price—or even better—for the gas plus associated oil or liquids. When I say midcontinent, I mean West Texas Intermediate; the WTI price as opposed to the Brent price.

Regarding the pricing structure within North America, the oil sands coming out of Alberta are selling at the low end of the market scale. If West Texas Intermediate is about $90/bbl, the Canadian sand oil might be $60/bbl. That is a one-third differential. Is that because the quality is so different? Not necessarily. The oil sand product quality is slightly lower than the WTI, but it is not a one-third difference in terms of molecules or energy content or refinability. The difference is in stranded infrastructure. The cheaper oil is geographically stranded up in the frozen north of Canada, and you have to get it out through pipelines and railcars. You cannot get it over the Rocky Mountains to the Pacific Coast. There are only a few places for that oil to go, so it comes south. In its first stop across the U.S. border, in North Dakota, it competes with the Bakken plays.

The great mover of midcontinent oil today is the North American rail system—the tanker cars. Back in the days of John D. Rockefeller, he could control oil markets with access to rails, rail shipping and tankers cars. Now you have to look at the cost of moving oil from midcontinent to another destination. If you are in North Dakota, you can move oil west to Washington or California, where there are refineries. Or you could move it to Chicago or farther east, to the refineries there. Or you could move it south, where you compete with imported oil at the Houston refineries. It is a very complex arrangement. And you must deal with the usual suspects—BNSF Railway Company and Union Pacific—the two biggies of hauling oil.

We’re seeing some truly astonishing developments here. Look at Delta Air Lines Inc. (DAL:NYSE), which spent $300 million buying the old Trainer refinery in Philadelphia. Actually, less than that when you take in the subsidy from the state of Pennsylvania. So now, Delta is importing oil from the Bakken to Trainer on railroad cars. Delta feeds its East Coast operations with jet fuel coming out of the Trainer refinery, including planes flying out of John F. Kennedy International Airport, which gives it a price advantage in the North Atlantic market. The price differential of just a few pennies a gallon on jet fuel is the difference between making or losing money on the North Atlantic routes.

Then, Delta can go to other airports where it operates, and beat up on the fuel supplier by threatening to bring in its own fuel. So Delta is extracting price concessions from vendors. It’s sort of an old-fashioned “gas war,” like when service stations used to see who could sell fuel the cheapest.

Midcontinent oil, midcontinent economics and transport by rail have completely altered the economics of other industries, including the rail and airline industries. North American shale oil plays have had an extensive ripple effect through the U.S. economy.

TER: Could building more pipelines to export facilities in the U.S. shrink those differentials?

BK: More pipelines will shrink the differential, but pipelines take time. In the environmentalist political world we live in today, it takes years to do all the permitting, and pretty much nobody wants to have a pipeline running through the backyard. Existing pipelines are golden because they are already there. Maybe they can be expanded, the pumps improved; we can tweak them or put additives in the fluid to make the product move faster. There are all sorts of possibilities with existing pipelines.

For the pipelines that are not built yet, you have the whole NIMBY (Not In My Backyard) issue. The railroad lobby and the lobbies of companies that build railroad cars also do not want to see new pipelines because these companies are more than happy to ship oil on railcars, even though in terms of energy efficiency safety and spillage, rail is less efficient overall.

TER: Based on this reality, how are you investing in shale space—or are you?

BK: Right now, I am investing in the shale space at the very fundamentals. It is a pick-and-shovel approach to investing. I focus on what I call the big three of the services companies—Halliburton,Schlumberger Ltd. (SLB:NYSE) and Baker Hughes Inc. (BHI:NYSE)—because these companies have people are out there in the fields with the trucks and equipment, doing the work and getting paid for it. Another company that I really like is Tenaris (TS:NYSE), one of the best makers of steel drill pipe. You could buy U.S. Steel Corp. (X:NYSE), for example, which is doing very well in tubular goods, but it is a big, integrated steel company with iron mines and coal mines. It owns railroads, and sells steel to the auto industry, the appliance industry and the construction industry. Tubular and oilfield goods are just a part of U.S. Steel. With a company like Tenaris, it is more of a pure play on the oilfield development.

TER: Are you are a fan of oil services companies at this point in time?

BK: Yes. In terms of a company that is actually out there doing the work, I have great admiration for Range Resources. Its share price seems bid up pretty high. In terms of the large caps, I am looking at global integrated players: BP Plc (BP:NYSE; BP:LSE), Royal Dutch Shell Plc (RDS.A:NYSE; RDS.B:NYSE),Statoil ASA (STO:NYSE; STL:OSE) and Total S.A. (TOT:NYSE), the French company. They are big, global and pay nice dividends. Even BP, for all of its troubles, is still paying a respectable dividend.

TER: Those are companies that also have exposure to the offshore oil area. Is that a growth area?

BK: Offshore is booming. Some companies are very good at what they do, and when you look at the pick-and-shovel plays, that would be companies like Halliburton, Schlumberger and Baker Hughes, among others. Transocean Ltd. (RIG:NYSE; RIGN:SIX), the big offshore drilling company, is making a nice comeback, as is Cameron International Corp. (CAM:NYSE), which is in wellhead machinery, blowout preventers and things like that. FMC Technologies (FTI:NYSE) is a fabulous subsea equipment builder, and Oceaneering International (OII:NYSE), which makes remote operating vehicles (ROVs), has done great the last couple of years and is still growing.

A couple of points about offshore. In the U.S. offshore space, in March and April 2010, right after the BP blowout, the U.S. government basically shut it down. The offshore space was utter road kill. By the second half of 2010, it was dead. It went from being a $20 billion ($20B)/year industry to about a $3B/year industry. Here we are, three years later, and the offshore industry in the U.S. is recovering. There is still growth.

If you look at the rest of the world’s coastlines, you see an increasing amount of concessions, leasing and acreage—whether it is in the Russian Arctic or the North Sea or off the coast of Africa. There are booming areas offshore of West Africa and East African plays, with companies like Anadarko Petroleum Corp. (APC:NYSE) and its huge natural gas discovery off of Mozambique. In the Far East, off of Australia, there is a whole liquefied natural gas (LNG) boom. Much of the Australia hydrocarbon story is in offshore LNG. These are huge plays involving great big companies, a lot of money, steel in the ground and lots of equipment that either floats on the water or sits on the seafloor. It is all good for the offshore space.

TER: Are there any particular projects that a BP or Shell is doing right now that you are excited about?

BK: Shell has a big play onshore in the U.S., part of the whole shale gale. Shell is a big global integrated explorer, but is backing away from the offshore East African plays because they are a little too expensive for the company’s taste. Shell has made investments in West Africa, off of Gabon, and also in South Africa, in the Orange Basin. I think Shell envisions itself as a future key player in South Africa, which is good because South Africa is a big, industrially developed country with a large population and big markets. South Africa has ongoing social problems, but it needs energy. So if Shell is successful in offshore South Africa, there’s a built-in market. Shell doesn’t have to tanker oil in or pipe it in or somehow move it halfway across the world.

TER: In light of what happened with BP, are these offshore oil plays riskier, since one accident can shut everything down. Or are large companies like Shell diversified enough that it doesn’t matter?

BK: I will never say that accidents do not matter. As we learned from the Gulf of Mexico, an offshore accident can be a company killer. BP literally went through a near-death experience. In the minds of some people, BP is still not out of the woods. The company has made settlement after settlement and it is still not done paying. It has divested itself of many attractive assets over the past couple of years to raise enough cash to pay settlements, fees and fines.

The good news about the aftermath of the accident is that, globally, there is a heightened sense of safety awareness in the oil industry. Companies have watched the BP issues very closely and learned every lesson they possibly can. All of the solid operators are hypersensitive and hypercautious toward offshore operations.

It all comes back to benefit some of the service players I mentioned earlier. The fact that many offshore drilling platforms had to upgrade blowout preventers to a much higher specification benefited the likes of Cameron and FMC Technologies. In the new environment, your subsea equipment must be built to a higher specification. So say thank you to FMC Technologies—which will gladly build it to that higher spec and charge you a higher price.

The numbers of inspections that companies must do when they work at the surface of the ocean are enormous. If a company has to inspect every 48 hours, it needs more ROVs. Who makes ROVs? That would be Oceaneering. There are other opportunities in other spaces, such as dealing with existing offshore platforms, existing offshore pipelines and existing offshore rig populations. One company that has done very well in our portfolio in the last couple of years is Helix Energy Solutions Group Inc. (HLX:NYSE). It deals with offshore repairs and servicing issues, and offers decommissioning services.

Individuals who go into these kinds of investments want to become educated about them. We are in these investments with a long-term, multiyear horizon because that is the investment cycle. From prospect to producing platform, these kinds of investments can take 10–15 years to play out. It’s like an oil company annuity for the well-run oil service guys.

The good news is that there is long-term reward, because large volumes of oil come from offshore. When looking at the shale gale, on the best day of the year in the Eagle Ford or the Bakken onshore, a really good well can produce 1,000 barrels per day (1 Mbbl/d). Six months from now that well could produce 400 (400 bbl/d), and a year from now it might produce 200 bbl/d. The decline rates are really steep. On some of the offshore wells, we are talking 15–20 Mbbl/d, which can be sustained for several years. The economics of a good well and a good play offshore are for the long term.

TER: It sounds like your advice is for people to do their homework and be in it for the long term.

BK: Yes. My newsletter, Outstanding Investments, talks about oil and oil investments all the time; subscribers receive my views over the long term. As an investor, you want to educate yourself about different companies in the space, what equipment is used in the space and what the processes are. You do not have to be a geologist or an engineer to invest, but you need to be willing to learn. There is an entire offshore vocabulary that you need to understand to appreciate the investment opportunities. You also need to be able to keep your sanity during times of tumult, when the rest of the market might be losing its grip. And you need to understand why you went into a certain investment in the first place and when it is time to get out.

TER: That is great advice. Thank you so much for taking the time to talk with me today.

BK: You are very welcome.

Byron King writes for Agora Financial’s Daily Resource Hunter and also edits two newsletters: Energy & Scarcity Investor and Outstanding Investments. He studied geology and graduated with honors from Harvard University, and holds advanced degrees from the University of Pittsburgh School of Law and the U.S. Naval War College. He has advised the U.S. Department of Defense on national energy policy.

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DISCLOSURE:

1) JT Long conducted this interview for The Energy Report. She or her family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Energy Report: Royal Dutch Shell Plc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Byron King: I or my family own 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: None. 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.

4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.

5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.

6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise – The Energy Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

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Source: Brian Sylvester of The Metals Report (6/11/13)

Commodities may have broken out of a commodity supercycle and could be hitting a cyclical trough. Lisa Morrison, the principal consultant of CRU Group in Philadelphia, analyzes the price outlook for 26 commodities over the next four years and gives them a temperature rating from hot to freezing. In this interview with The Metals Report, Morrison, using this rating methodology, details which commodities she expects to offer the best upside for investors and which to avoid.

The Metals Report: Lisa, CRU recently published a report, “CRU Commodity Heat,” which measures the near- and medium-term outlook for 26 different commodities, most of which are mined. How does CRU measure the market heat of these commodities?

Lisa Morrison: We start with the average for each commodity price in the first quarter of 2013 and then we compile CRU’s view of the change in price between the first quarter and the annual average for 2013 and then each year through 2017. We do this analysis every quarter.

We categorize commodities according to their anticipated price movements. A hot commodity has an anticipated price increase of 15% or greater, warm is 5% to 15%; mild is 0% to 5%, cool is 0% to -5%, cold is -5% to -15% and freezing is greater than -15%.

TMR: Are there any hot commodities right now?

LM: Looking at the 2013 annual average, we don’t see any hot commodities. That’s because most commodities have come off of some very high points. The end of last year saw a bit of a crash. The strongest increase that we see between Q1/13 and the 2013 annual average is cobalt.

But looking further out into the forecast to 2017, we see some commodities that could move into the very hot region.

TMR: With so many commodities in the mild, cool, cold and freezing zones currently and in the future, does that mean we could see mines being shut down?

LM: A steep drop in the commodity price certainly could indicate that we have a period coming where strong oversupply means that producers may need to shut down, especially the higher cost ones. If a commodity has been very expensive in the past, meaning its price has been much higher than its cost of production, a steep drop in price doesn’t necessarily mean output would be curtailed. It just means that the market is returning to some sense of normalcy. Copper is a good example of that.

Gold is a case where prices have come down quite a bit too, but because of lack of investor interest rather than needing to shut down gold mines. Aluminum is a case where the market is much oversupplied and the commodity is under some cost pressure. We’ve seen prices come off quite a bit in aluminum, but our heat chart doesn’t show prices are going to decrease much further, simply because prices can’t fall much more. They’ve gotten to the point where producers have to start shutting down because of overcapacity.

TMR: Has the lack of heat in your forecast led you to conclude that the market for these metals has hit a cyclical trough?

LM: That is our view on 2013, but by 2017, we’re looking at markets that are sending a signal to producers to cut back or maybe not ramp up capacity quite so quickly.

The macroeconomic environment is uncertain. Is China going to pick up? Is the U.S. going to pick up? Is Europe ever going to come out of recession? With so many questions on the demand side, producers are being very, very cautious.

We’re probably in the cyclical trough now and I would point to October 2012 as an inflection point. At least in exchange-traded commodities, investors were selling off because they realized that Chinese economic growth was not going to be 9% anymore. It was going to be something more like 7% or 7.5%. There also was a recognition that the U.S. wasn’t going to be picking up and that Europe wasn’t going to do very well in the coming year. Then, of course, we had another selloff in the spring, in March–April, because, again, the economic growth prospects weren’t very good. We’re probably in the low period right now. It’s hard to say how long cyclical troughs last because they vary by commodity.

Depending on the commodity it takes a longer time or a shorter time to shut a mine or shut an operation. A lot of commodities are sold on contract basis, on a one-year contract or six-month, nine-month, etc. Production happens and continues to happen because an agreed-upon arrangement exists. It takes more than six months for commodities to really respond to lower prices. As for the 2017 outlook, today’s lower prices are causing producers to ramp up much more slowly or even cancel new projects. But by the time we get through 2014 and into 2015, we may be back in the situation where we really need more capacity in these commodities.

TMR: What’s CRU’s outlook on China?

LM: It’s easy to feel depressed about China because we’ve been accustomed to such a fast growing economy, with double-digit industrial production growth. You can’t sustain that kind of growth for long. The economy now is going through a transition. If you think about Korea in 2000 versus where it was in 1980, it’s a similar situation, but China is a much, much bigger economy. Our view is that China will still achieve strong GDP growth in the 7–8% range over the next couple of years. Industrial production growth won’t probably be double-digits except in a very good month or a quarter here and there, but something in the 7–9% range. China still has a lot of infrastructure to build. People will get wealthier and will need and want more and better food. They are going to need more oil and more cars; they are going to want homes and washing machines. Even though the super fast growing commodity story in China may be over, it isn’t as if we’re getting to a point where China is not going to need commodities anymore.

TMR: Does your view of China lead you to conclude that the commodity supercyle is over?

LM: The commodity supercycle is probably over, but I don’t think it’s the death of commodities. The supercycle was after all driven by the unexpected strong growth in China and expected weakness of the U.S. dollar. At the same time, the metals and mining industries had gone through a period cost cutting, so there had been no investment in capacity or exploration. As a result, the mining industry was completely unprepared for the large surge in demand from China starting in 1995 and picking up again after the Asian financial crisis, in 1997, 1998, 1999 and the end of 2000, which was a peak period for commodities in general. That was very attractive for investors and that is what promoted the supercycle. Now we are going to see that back off. China’s commodity growth isn’t going to be 10% year-on-year; it’s going to be much smaller. But don’t forget that economies with large populations in Asia and in Africa are eventually going to be transitioning as well.

TMR: Do precious metals prices tend to be a leading indicator of a cyclical trough or are they more likely to be some of the last commodities to fall?

LM: Precious metals often function as a safe haven in times of high uncertainty. After the financial crash we didn’t know if the economy was going to survive or how we were going to get economic growth. We saw investors very interested in gold and silver at those times. Of course, prices remain very elevated compared to prior to the crash. Precious metals prices certainly seem to be countercyclical and have high demand, both financial and physical, during periods of high uncertainty.

We have witnessed a certain amount of selling in gold and silver since the middle of last year. That’s because the worst-case scenarios, such as a Eurozone breakup or China sliding into recession, didn’t come about. Even President Obama and Congress managed to get past the fiscal cliff. Investors began telling themselves that because the worst didn’t happen, they didn’t need to be invested in safe havens anymore. That caused a selloff in gold and silver that turned out to be a precursor to selloffs in the rest of the metals space. In that respect they were a lead indicator that the worst of the uncertainty had passed. I don’t think you could look at precious metals demand as necessarily a lead indicator for an economic cycle per se. I think they definitely have a role to play during a cycle and may play a leading role again with consumers when things are looking better.

The U.S. economy is on a much stronger footing than it has been since 2006. The U.S. economy has been a nonentity in the story for the last seven years. Our view is that this year we’re likely to get 2.5–3% GDP growth, moving to the 3–3.5% range for the next two years. That is even slightly above trend compared to what demographics would give you. The U.S. economy is really looking in much, much better shape than it has been for quite some time.

Don’t forget that Japan is going to emerge as well. It’s also been an absent actor on the global economic stage. It’s a big economy and it’s going to emerge from this sleepwalking stage in the next year or so. I think that’s very exciting. It’s hard for me to be very negative about what I see over the next two years. Maybe the next six months aren’t that great for commodities, but over the medium to longer term the outlook is very positive.

TMR: What is your outlook for gold, silver, platinum and palladium?

LM: Our forecast is that the gold price peaked in 2012 and that the good times for gold are pretty much over. We expect prices to come down through 2017. In silver that is also the case. If the interest in gold has peaked, the interest in silver is gone and that price is going to come down a lot faster. I certainly would not want to be holding either one of those for any length of time.

Platinum and palladium are a bit different because they are much more industrial type metals. They are produced in very small quantities in markets with supply constraints. Particularly in palladium, we also have had inventories that were coming out of the former Soviet Union and those Russian stockpiles and shipments are ending. There’s no more left there, so we are coming back to the actual private market.

This means producers of palladium now have to increase capacity to meet demand. We’re looking for pretty strong price increases—extremely strong in palladium. That’s one of the super hot commodities. Going out through 2017, platinum would also fall into that super hot period because it’s expected to increase well over 15% over the next five years. We’ve got lower prices now, but new capacity is going to be needed, so prices will pick-up after 2015.

TMR: What other commodities do you expect will move from neutral into the hot category over the next few years?

LM: We’re looking at cobalt, which has had the strongest price increase this year. The best of the price increases are going to be in the very near term and things will slide off after about 2015–2016. Tin also has had some supply constraint problems, so that’s going to move into the hot category next year.

Zinc, which is much oversupplied at the moment, is quite likely to move into the hottest commodity category five years from now because the new mines that we are going to need can’t be financed at today’s prices. With financing as tight as it is, those zinc mines are not going to be started for the next couple of years. It takes quite a few years to bring a zinc mine into production, so we could be looking at a late decade squeeze in zinc.

TMR: What about copper?

LM: Copper prices have been well over $7,000/tonne and have found it quite difficult to break below $6,800/tonne. Copper is likely to be better supplied than it has been for 10 years, so a major shortage going forward is unlikely. Of course, that assumes that the mine supply comes on the way it is supposed to. The mines are coming on in places that traditionally have had some difficulties such as Peru and Africa.

We will probably still see relatively high copper prices, meaning something in the $6,500–7,500/tonne range, to bring on these new mines needed in the next five to seven years to meet demand. Everything in copper hinges on whether or not mine supply comes on as expected.

TMR: Nickel prices have been very weak over the past four or five years; why are you predicting a 41% increase between now and 2017?

LM: Nickel has been punished because it’s in oversupply. Supply came on at the wrong time, just when demand was coming off. Demand hasn’t really picked up terribly well. In China nickel pig iron is used as a cheaper alternative to pure nickel. This was how China dealt with its shortage of nickel resources and its need for more nickel for stainless steel. Stainless steel is a higher-end commodity. China is shifting from heavy industrial or heavy infrastructure to something that’s more consumer oriented and more high-value added. Although the demand for steel and iron ore may go down and those prices may fall, that shift to something consumer oriented is going to support nickel prices going forward. It’s really a China story in nickel again.

TMR: How are gold and silver likely to react to the unwinding of quantitative easing in the U.S., Japan and Europe?

LM: If we get a lot of inflation because of the unwinding of quantitative easing, we may not see the drop off in prices that we’ve forecasted. Our view is that quantitative easing in the U.S. isn’t going to start to get unwound probably until the end of next year to any significant extent. It will be done in a relatively gradual way. Unwinding in Japan probably won’t happen until well after that because its central bank has institutionalized yet another round of it. It’s going to be a gradual process. The winding down will be difficult to time because we can’t even get that information out of the Federal Reserve Board at the moment.

As those uncertainties are reduced and things become clearer, then what we do at CRU is look at sentiment in the next year or two and try to figure out how that affects the price forecast. Then, as we move away from year two, we really should revert to the fundamentals of supply and demand in those markets.

We can’t really see how the current price of silver is justified given that the lack of massive investor influx to support the price. That’s why we expect the price to come down. Gold is a little a bit different, but similar. We look at supply and demand. We look at what investors are doing. Investors have really sold off. The question that you need to ask with gold is what’s going to make investors buy again? Or will they keep unwinding at opportunistic times?

TMR: Do you have an answer to your own question?

LM: The only thing I think that would cause people to buy more gold again and to go through another cycle of this massive investor buying would be if it became a commonly held perception that quantitative easing was going to be unwound in a way that was going to cause very high levels of inflation. In that case, all commodity prices would go up, but certainly with gold and silver as safe havens, the demand for them would be even stronger.

TMR: Where should investors be long with mined commodities?

LM: The best prospects for being long over the next year in exchange-traded type commodities are probably tin and palladium. Looking at 2017, economic growth picks up after 2015. We hope that market conditions are more normalized. We should be getting finished with quantitative easing. We should have better market signals. In those cases probably the really good prospects there for exchange-traded commodities are zinc and nickel.

TMR: Thanks, Lisa, for your insights.

Lisa Morrison was a speaker at the Society for Mining, Metallurgy and Exploration “Current Trends in Mining Finance—An Executive’s Guide” conference.

Lisa Morrison is an industry analyst in the copper and aluminum markets with the CRU Group, a business intelligence company. She specializes in assessing risks to the short-term outlook and is currently building a research platform to help CRU better predict and model investor behavior in the metals market. She has worked at CRU since 1995 and spent 12 years in the firm’s management consulting division working on projects in aluminum, steel and base metals. Prior to CRU, she spent five years at Haver Analytics and before that more than one year at the Korea Trade Promotion Center. Morrison holds a masters degree in economics from New York University and a bachelors in economics from Drew University.

Want to read more Metals Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our <href=”#interviews” target=”_blank”>Streetwise Interviews page.

DISCLOSURE:

1) Brian Sylvester conducted this interview for The Metals Report and provides services to The Metals Report as an independent contractor.

2) Streetwise Reports does not accept stock in exchange for services.

3) Lisa Morrison: 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.

4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts statements without their consent.

5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.

6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise – The Gold Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.

101 Second St., Suite 110

Petaluma, CA 94952

Tel.: (707) 981-8999

Fax: (707) 981-8998

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By HY Markets Forex Blog

The German’s closing Consumer Price Index (CPI) rose by 1.5% in May year-on-year, according to reports from the German statistical body Destatis released on Wednesday.

Economists and analysts forecasts no changed would be made, indicated from the previous month’s preliminary reading. The German’s CPI increased in May, after dropping by 0.5% last month.

Germany’s Gross domestic product (GDP) aligned with the market forecast by an increase of 0.1 percent quarter-on-quarter in the first three months of the year, compared to the fall of 0.7 percent last year.

Following the sluggish growth in the country’s economic activities in the second and third quarter last year, the restraining growth were not enough to balance the high drop in exports and equipment investment, according to reports released.

Reports indicate that the slowdown was temporary and that there was stabilization in the first quarter of this year.

According to EC, the GDP is expected to advance by 0.4 this year and by 1.8% in the following year 2014. “Export expectations have brightened noticeably, although external orders for industrial goods have dropped back down again,” EC said.

Germany’s economy growth is projected to toughen and grow stronger gradually this year and increase by 2 percent by 2014, according to the organization for economic cooperation and development (OECD).

“While subdued activity in the euro area will hold back the recovery, the pickup of world trade is projected to increase export growth. Wage and employment gains as well as low interest rates will support domestic demand, narrowing the current account surplus to 6% of GDP. The unemployment rates is expected to fall somewhat further, while consumer price inflation may rise to 2% in 2014”, the OECD said.

The post German final CPI increases by 1.5% in May appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

The West Texas Intermediate oil futures dropped for the third day in a row, after the U.S crude stockpiles increased and the API reports indicated that inventories rose at its most in over four years.

WTI slid by 1 percent in New York after crude supplies increased by 8.97 million barrels last week, according to reports by the American Petroleum Institute.

Investors are awaiting reports by the Energy Information Administration (EIA) which is expected to show an increase by 550,000 barrels last week.

WTI crude traded at a low 0.97% to $94.46 a barrel, while Brent Oil traded at 0.70% to $102.24 a barrel, both as of 5:29am GMT.

According to reports released from API, last week crude oil supplies increased by 8.97 million barrels, the biggest increase since 2009. Distillate-fuel stockpiles also increased by 199,000 barrels last week, the API said.

The Organization of Petroleum Exporting Countries (OPEC) reserved its forecast for the year unchanged. According to reports released by OPEC, the global oil demand is expected to increase by 780,000 barrels a day to 89.7 million a day.

OPEC has boosted production by 106,000 barrels a day to 30.57 million a day last month.

WTI crude futures for July dropped to a low 92 cents to $94.46 a barrel in electronic trading .The European benchmark rate was at $7.57 to WTI futures.

With the high US oil production, the global demand for oil continues to remain weak in the market.

The post WTI declines as API reports increase supplies appeared first on | HY Markets Official blog.

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By Profit Confidential

In a fascinating work on long-run economic cycles, J. Anthony Boeckh’s book The Great Reflation offers up some poignant research on the U.S. economy and its cycles.

The Great Reflation is a non-political, historical breakdown of inflation, monetary and fiscal policies, interest rates, and long-wave economic theory. It was completed in 2010 and made several predictions on the U.S. economy that have turned out to be correct so far.

Boeckh, former publisher of the Bank Credit Analyst, delves into past financial manias, asset inflation bubbles, asset allocation for the aftermath, the U.S. dollar decline, commodities, and the monetary future of the stock market and the U.S. economy.

Here is a summation of Boeckh’s observations:

1. The global financial system will always remain flawed and subject to price inflation and bubbles, so long as it is based on fiat paper money.

2. Before 1914, most Western countries had a monetary regime that legally restricted central bank money creation based on its holdings of gold.

3. Average interest rates fell throughout the 100 years leading up to 1914.

4. In the absence of a financial system based on discipline and restraint, all anchorless fiat money systems (especially the U.S. economy) are destined to suffer inflation and instability.

5. Investors will be playing cat-and-mouse with the Federal Reserve for years to come—a problem caused by excessive private and public debt.

6. Deleveraging of the private sector bodes well for the transition process to the next long-wave cycle (2015+).

7. If the U.S. economy can’t help reduce the debt-to-gross domestic product (GDP) ratio in a timely manner, investors will face a public-sector debt supercycle larger than the post-1982 private-sector supercycle.

8. In the short term, deficits and extreme monetary expansion help the private sector repair balance sheets, but they cannot raise the standard of living for the average person.

9. The real total return of the S&P 500, deflated for inflation, is remarkably consistent over a long period of time.

10. Tactical asset allocation is the key to wealth creation and capital preservation.

11. In a world of economic fragility, investors want stability in the U.S. dollar, but the long-term outlook is bearish.

12. Gold is a crowded trade, but it’s useful as an insurance/inflation hedge in portfolios. Gold is an emotional purchase. Financial/investment demand for gold differs greatly from consumption.

13. Long-term returns from commodities as an asset class are unreliable and they trade in manias.

14. Historically, rising fiscal burdens hasten the demise of empires. The U.S. economy can chart a positive new path, but only with the removal of the political stalemate of vested interests.

15. There will likely not be any effective reform of the global monetary system anytime soon. Greater price inflation is coming.

16. The stock market has proven it does well following long-wave troughs after major financial crises.

17. The long run in this investment world no longer exists. Wealth preservation and portfolio safety are critical.

18. The music has started playing again, but there aren’t enough chairs for when it stops.

The Great Reflation is a very thoughtful historical look at the long-run economic cycles experienced by the U.S. economy. (See “Equity Flux, The Stock Market’s Latest Problem.”)

The U.S. economy has been consistently swept away by asset bubbles and financial crises, and Boeckh clearly demonstrates how monetary policy so powerfully influences cycles with changes in interest rates and price inflation.

Looking at the data and tables presented, the inflation-adjusted long-term uptrend in the stock market (since 1929, including dividends) averages just under seven percent annually. This is littered with long periods of extreme undervaluation and overvaluation.

Boeckh’s best advice is to employ “tactical stock market reallocation” to continually adjust your exposure to equities as monetary policy perpetually changes the inflation/deflation cycles experienced by the U.S. economy.

Article by profitconfidential.com