Nobel Laureate suggests Ponzi Scheme?

What would you think about this?

You are the US government.
You need money to pay for the obligations you have to fullfill.
You are the government of the most powerfull country of the world.

And still, some idiots (Senate and Congress) would impose limits on the debt you can raise.
Some other idiots (historical ones) passed idiotic rules (debt limits) that would not allow you to spend money without limitations.

By law, you are even not allowed to print money. Why not? What idiotic rule ... why not just print your way out of any cash limitations?

But - oh my boy - you got nobel laureate Paul Krugman on your side.

Why not - as you are not allowed to PRINT - why not MINT your way out of the debt problems? Why not 'produce' a ONE TRILLION PLATIN COIN? Out of thin air ... well almost out of thin air. You still would need an ounze of platin. And the production costs ... 2.000 USD? One Trillion with costs of 2.000? Why not only produce one of them? Why not ten?

Whom do you really think you can fool?

I strongly recommend that the nobel laureates should not be allowed to run Ponzi schemes!

http://www.bloomberg.com/news/print/2013-01-08/debt-limit-showdown-spurs-debate-on-trillion-dollar-coin.html

http://www.bloomberg.com/news/2013-01-08/debt-limit-showdown-spurs-debate-on-trillion-dollar-coin.html

China Buying Gold ...

Well, it is not China alone:

China Gold Buying 35 Times that of US

When I see the graph, I would trust economic policy the more the further left (only on the chart!) the country ranks.

When you read on, it looks like the Chinese policy seems valid and gives good advice to its people. Alternatively, you can also google: china gold attack usd
What you get is the same facts: China buys gold. Just with a different spin. Evil communist China attempts to devalue the US-Dollar by bying gold (instead of US-T-Bills).

Well, maybe China is dumping US-D. Can you blame them?
Seems like the US-treasury does not any more!

But where did we start? Ah, I forgot: China is buying Gold ... massively!

Side Efects of Taxageddon

Back in May of this year, I wrote about Taxageddon or what is now in the headlines every day: the financial cliff. With the suggestions of the Democratic Party and President Obama, its more a tax cliff by now, as the left wing has almost no spending cuts in its program, but a lot of higher taxes. But I want to focus on just two side effects of the ongoing discussion about reversing tax cuts: Why it might come to a year-end sell-off and what currently happens to dividend policies of US companies.

Without an agreement in the next weeks - I would say latest by 24th of December - capital gains tax will raise. At the moment you pay 0 to 15 % capital gains tax. This will go up to a minimum rate of 10 % and as high as 20 %. While this is still comfortably low compared to most European countries, it will certainly make a lot of folks think about their year-end-action. Imagine you bought your stocks back in 2009, after the financial crises and they are up now by 100 %. It will certainly make a difference for you whether you have to give away 15 or 20 % of those gains. Just by selling now, and buying back later next week, you can cut the tax burden on this sale by 25 %. And if you worry about the market conditions at them moment, you should for sure sell now and not on January the 3rd.

To me, it remains unclear whether or not we already see some of those sales. You could interpret the sell-off after the announcement of Obama's victory as induced just by this fact. But it is mere speculation. You could also argue, that the outperformance of the European, especially the German market has something to do with this taxation issue.

Second tax cliff issue, that already led to tax evasive measurements announced publicly is the dividends tax. Taxation on dividends will move from 15 % to personal income tax rate - so to a maximum just short of 40 % federal tax (+ state tax). Companies noticed, that they and especially their large share holders will be worse of receiving dividends next year. Some of them took evasive action - and this is especially if you have huge shareholders (like a family, or part of the management. (Also do not forget, the dividends paid out are from the profits of the companies - they have already been taxed by roughly 30 % before they get paid to their owners!)

COSTCO will pay a special dividend of 7 USD/share while the normal payment rate is 0.275 USD per share per quarter. To do so, COSTCO raise 3.5 USD bn of additional debt. Share price did rise over 100 USD after the announcement. 

And COSTCO is not alone. On 27th of November, Financial Times counted 37 companies that had announced special dividends from October to early November and 66 that did so since the US election. The whole dividend issue might have pushed the indices up, as such announcements would put upward pressure on stock prices immediately (see the price hike in COSTCO).

Adding up the capital gains issue and dividend issue, the 'tax optimized investor' would have:

- sold all his non-dividend paying stocks with gains since he bought them by now

- bought shares of stocks who would announce a special dividend prior to such announcement (the hardest part - without insider knowledge you could have speculated during the last weeks who would do so, though)

- and will again sell all his dividend paying shares once he qualified for the dividend by mid December

- and then he will buy them back later in December or early next year for a discount.

Taking the discussion a step further, the ones expecting such behaviour would be short by now ... which leads us to the interesting question: is short interest in general higher at them moment than normally? A field for your input and my research ....

Trustable Gold?

Today I found an interesting web-page - Trustable Gold.

After the Munich International Precious Metals & Commodities Show I tried to collect more information regarding investment (and storage) in precious and strategic metals. 

Two evening invitations turned out not really convincing.

Schweizerische Metallhandels AG made a nice presentation in a convincing surrounding. Only trouble here is you invest in metals not traded on an open market. And as there is no market price you have no idea wether you are treated fair. But even done so: the margins are quite high. Still it looks like an option. I just do not feel really good about it so far.

Mida Trading AG was even less convincing. Their presentation was crowded, taking place in the rooms of a Volkshochschule. Who ever want to attract people investing money should find better places. The speaker was quite amusing, but the company was not really in the focus of the whole speech. This was more about investing, inflation, Gold, ... in general. 

Quite clear was, how seriously this company keeps track of who brought contacts and visitors. From my point of view, the percentages to be gained by selling are very much of importance here. Plus: the offer is for sure not cheap, even with the special discounts they offer you after 5 minutes of discussion.

All that brought me to a little more research on the Internet - and two companies I know since a long time popped up: GoldMoney and proaurum. Both offer storage options, but with very different concepts. I will not go into details here for the time being.

What TrustableGold offers is just an evaluation of the offerings of different companies who allow you to store  Gold. GoldMoney and proaurum are rated. It was really nice to see, that GoldMoney got a top rating; proaurum did not.  

Still, I guess I will try to get more information on both concepts (and share them with you).

Und wenn Du glaubst es geht nicht mehr ...

.... kommt von irgendwo ein Lichtlein her!

Or so goes a German saying. Gosh.
Not sure what happened today ... markets looked awful - and just from nowhere all markets are in GREEN mode. I know, I know - lame duck president avoids fiscal cliff over the weekend - blah, blah, blah ... but hey - that is the news event driving the market?

Guess in the next days we will learn where that bucks (and EUROs) did come from.

Post-Election Action

While the USA might not be the strongest country any more, might not have the best infra-structure, or producing economy --- it for sure is still the epicenter of the financial markets.

With the elections behind us and some uncertainty lifted, what are the take-aways?

1) 16 of the DOW30 stocks trade below 200-day-moving-average; 15 of them look like a sell  following my chart patterns. The markets dropped significantly with the DOW30 below 13.000, the S&P below 1.400 and the NASDAQ below 2.650.

My read: After the decisive outcome of the election we saw a short rally as this was better than a stalemate with weeks of discussion. But it seems, the market expected a Republican win and now hads lower. Also the focus has shifted from the elections to he fiscal cliff approaching in seven-league boots.

2)  German market also look unhealthy, but at least still holds the 7.000 level. The MDAX is still within its upwards trend, but on the lower end. Germany clearly looks stonger than its European fellows - FTSE, CAC showing signs of late weakness. Only the ATX and SMI look as stable as Germany for the moment: same language, same thinking, same stock trend.

3) The EUR gained strength compared to the USD - or the USD lost ground ... My read is that here we see the same shift in focus than with regard to US stocks. Fiscal Cliff and discussion about the debt/deficit limits in the US are on the horizon. Last time Democrats and Republicans could kick the can down the road at the last moment - and it hurt the USD very much. 

4) Gold/Silver was hammered last week - and I tried to get some but placed my limit a few bucks to low. With Obama in office, its back well above 1.700 USD - same chart for silver despite worries of a weakening economy. Gold in EUR is close to its all-time-high and approaching 1.400-levels now. Here I guess the market was anticipating a (chance of) more prudent fiscal and monetary policy from Romney/Rian. With that out of discussion - and Bernanke likely to stay - an upward trend from gold seems to develop.

5) Obamas victory speech  was a first step towards the Republicans. I guess 50 % of his speech Romney could also have made ...

'... you hear the deep patriotism in the voice of the military spouses, working their phones late at night, to make sure that no one who fights for this country ever has to fight for a job or a roof over his head when they come home ...' 

Obama or Romney?

So what are the takeaways:

- I expect US stocks and the USD to be somewhat depressed for the next weeks, unless Obama can put on a deal on fiscal cliff issues fast

- focus of US markets will be the US - so Europe is ganted some more time to move ahead

- whilst the elections might have had an impact on short term outlook of Gold, mid and long-term the USA, Europa and Japan can only try to inflate away their debt; the opportunity to buy precious metals lower is gone with Obama still in place

- Bernanke will not run for a 2nd term; I guess the rumors about him not doing so have been linked with the fear that a Republican president might not see him as first choice

- I would say there is a 75 % chance, that the fiscal cliff will be a fiscal hill - it would be unwise from both parties to stand by their left- or right-wing extremists and let the US run into very hard times. Instead they will fight for a compromise, kick the can down the road, both presenting themselves as victorious. They will strike a deal, where maybe taxes on the rich go up, but not the tax rates (by reducing exemptions). Where spending will be cut - but with room to point on the cuts the other side hurts more.

- Once the cliff is behind us and we cruise down the hill, big money will have accomplished something else: invested heavily in bonds they already have a guarantee to make an exit here with central banks buying up those papers (see QE3, Draghi comments in Europe, BoJ policy). Guaranteed sell at all-time-high prices. Instead of shifting to stocks now, those guys just have to wait for lower prices on stocks; so several weeks of discussions on the US debt, the fiscal policy - all with southwards impact on the equity-markets - will only second their goal.

Those are not markets any more. Maybe we should be worried about real output, production volumes, spending and saving - if we would have a market society any longer. Instead we have to analyze what fits into the strategy of the big players. What do European, Chinese and finally US politicians want to achieve? What game are the central banks playing? What is big money doing? You really think all the Wall Street guys out there do not know that bonds have never in history - never in history - been as much over-valued as they are today?

My tactical plan for the next weeks til year-end:

- lighten up on stocks when individual charts start to look ugly - rather not invest into new ideas until the fiscal cliff is hopefully eroded to a fiscal hill

- shift 30 % of my monthly equity-funds-purchasing programm into an alternative where I buy gold or silver

- play the USD/EUR FX rate

Have a good night and stay flexible!

IPM&CS Munich - Part V - The Speeches

Int. Precious Metals & Commodities Show Munich  -  PART V
Int. Edelmetall- & Rohstoffmesse München  - Teil 5

 Here comes the fifth and final part of my report from the Munich Edelmetall- & Rohstoffmesse. I will have at least one follow-up, as I visited a speech of Schweizerische Metallhandelsgesellschaft yesterday.

The speeches came in two kinds. Type I was 20 minutes speeches from companies, mostly miners and explorers. This had little value to me, as I was quite unprepared and I am not the kind of technical guy, who can make an evaluation on drill hole results and the kind. Still I watched several of those, as otherwise it would have been impossible to get a seating on the Type II speeches.

One that made some impression was BacTech Einvironmental Corp. The company is using the tailings of mines and uses bacteria to recover metals left behind.

 

Type II speeches were more of general, macro type.  I will give you several links here of the guys I watched and will address the major points they made.

Major points:

- there was no 'deflationist' - not a single one I listened to. Everyone was quite sure, that inflation will happen (or: not happen, but be the choice politicians will make). Well, you could argue, that is no surprise given the surrounding of the Precious Metals & Commodities Show. But Gold was always marketed as an asset, you could - also - invest in during deflation. So seeing no deflationist was a surprise to me.

- people are really willing to listen to a very theoretical presentation about Mises, Hayek, and the Theory of Money today. Well, not the average teenager on the street, but at least 300 to 400 folks. I really like to see, that Austrian economists are on vogue again.

 -  I did see the worst presentation I ever - ever - saw. And this one was paid for! It was the presentation of Prof. Dr. Han-Jürgen Bocker. The worst slides I have ever seen! Jokes that are politically non-correct - very much so. Really disgusting trash-talk, treating woman as inferior objects. And the guy was even proud of being able to go on with this s..t for hours. But: the room was full, the listeners yelled, even the quite educated visitors of the show did fall for him.
He was spitting out everything he knoww, all at once. Not that the facts would be false. But dropping them on your listeners all at once, with no structure, no idea how to make it a logical story, not picking them up where they stand and leading them some steps upwards ... you just drown folks, overlaod them with facts, overnews them.

 - Uwe Bergold - one of the speakers sponsored by proaurum.de was one of the long-term orientated speakers. He pretty much demonstrated to me, how hard it is for me to trust somebody talking with a local slang (Bavarian in this case). But it was a nice presentation, with good facts. Not really new to me, citing sources like Shadowstats.com I follow since years.
Very important statement he made: Every market booms and busts. So you have to think about your exit strategy in advance. The gains of years and decades can vanish in a few months when a market crashes. So make sure, you are in a position to exit when it is time to do so.
But for the moment, Bergold still is bearish on paper money ... and therefore suggest to buy precious metals.

- Best presentation I ever saw life was Gerald Celente. His name was not totally new to me, as Jim Puplava interview him several times at FinancialSense. But what he delivered - in a huge room totally overcrowded - did surprise me. I was expecting a speaker with hundreds of presentations behind him --- but he looked to me as pushing for impact very much. Someone very dedicated to make an impact, to change the picture, to influence the developmet.

The presentation was so much different to Bocker. Hardly any text. Almost no charts. A Picture presentation.

 

A clear structure. A red line you  could follow - had to follow - while the speech was given. An Italian SIGNORE making jokes on the Italian way of living.

And somebody ending with a mixed picture ... Celente thinks its likely we will end up in a very nasty century with lots of wars, big wars, close to world wars. On the other hand-side he motivates to become better, to excel and reach out for the best you can reach. An those raise the bar for our so-called leaders. 

 

Very motivating speaker at the end of the show: Mister Dax Dirk Müller.

Four points to take-away from his speech:

- the US and China does not like to see a strong Europe. Europe does not have to fail. We can make a difference - USofA is just afraid of an western power as strong or even stronger then them. We can overcome the European troubles. Do not let US-bankers tell us we cannot.

- bond holders - the huge ones with political influence - made sure they can dump the bonds they hold on central banks. Central banks will buy at the absolute high ... and GS, Pimco and similar guys will sell at the peak. So far, that is just a fact. Interesting question to ask yourself: will current bond holders have enough influence to force stock marekts to break down ... so that they cannot only exit at the peak, but also enter at the (stock market) bottom?

-  any credit is a debit. Nice thing is: you pay interest on you own debt (for sure. Be it consumer debt or debt on your mortgage ... that's the way it should be). But then you pay interest on state debt ... as the government will just raise taxes high enough to pay the interest on 'its' debt. And then you pay interest on the debt of all the companies out there. And you do so by paying the price of the goods you need - and this price is full production cost + cost of capital including interest on debt + a margin for the company.

The whole system is stable, as long as debts do not exceed a certain level. Once they do, the 'average guy' (the one with a job, good paying, not in debt, not living on social benefits) will just collapse ... he cannot bear it any longer.
So the share you pay for interest in the system will grow - until you cannot longer stand it. And once you cannot stand it any more, wealth has to be redistributed from the ones 'having' to the ones 'producing'

- and this redistribution can be done two ways: quick or ... slowly / dirty .. .whatever you want to call it. Quick is: Default - Taking wealth from the 'rich' (= middle class) and give it to the others - Expropriation. Slow and dirty is: Inflation.

And we should all hope for the slow and dirty way, as this is the way you (being a guy with wealth, net worth, some assets) can take actions and outsmart the others, protecting at least some of the stuff you did earn and safe, put aside. 

Immediate actions of theft you can hardly avoid. 

So lets be a (THE) friend of inflation!!!
Let us elect socialist governments!!!
Hail to Obaman!!!

(Sorry - getting sarcastic here.)

Prof. Dr. Max Otte

Thorsten Polleit 

 Prof. Dr. Hans J. Bocker

Uwe Bergold 

Gerald Celente   

Dirk Mueller

IPM&CS Munich - Part IV - Explorers and Miners

Int. Precious Metals & Commodities Show Munich  -  PART IV
Int. Edelmetall- & Rohstoffmesse München  - Teil 4

 

There must have been close to 100 of those companies - which was quite a surprise to me. None of the real big guys (like Barrick, GoldCorp, ...) - guess the most known one is First Majestic Silver. And then down to real small companies with a market cap of 15 - 20 EUR mn. 

 

Apart from gold and silver we had uranium, potash, palladium, platinum, tantal, rare earth, graphite, copper. Projects from all regions of the world - the Amicas, Serbia, China, India, Africa. Companies have been in all stages: exploration, starting to build the mine, months away from producing, full producer. Some of them with done financing, some with positive cash streams to further grow, some with dividend pay-out - and others where further stock dilution is to be expected.

Finding such a portfolio of companies at the show did surprise me. Think about on of those small, more-or-less unknown explorers. What can they expect at a Munich show? 100s of private / retail clients buying shares for 5.000 EUR each? Analysts showing up at the booth and asking questions, starting coverage suddenly? Institutional investors being convinced to put money into those companies?

Surprisingly, many of the small companies told me that Germany is important for them, as a big part of their shares is held by Germans (No. 2 or 3 in ranking). And this is really with retail customers, German institutional holders are hardly present. Some companies have a second listing in Germany.

What you get here is direct access to CEOs, COOs, presidents and vice presidents. I was not really preparing for the show, so I was not able digging deep with questions. To really get more out of it, you would have to do your homework ... guess most of the material presented here you can really get from the internet pages of the companies. What they are dropping here and there is a hint on news to come ... like Q3 results, new updates on drilling, ... Well, that's of course also a marketing gimmick.

 

Any highlights? Well, I am not really sure. At least interesting stuff:

BACTECH: biotechnological extraction of recourses from tailings (mine dumps)

URANERZ ENERGY CORP: in-situ recovery of uranium

 

 As a conclusion: the concept (direct company access at the show) is for sure interesting, but without more preparation on the side of the visitor, this will not really give you an edge. A nice waste-of-time; to get more out of it you have to focus and specialize on some of those companies (read: work to do!)

 

... more to come ...  

IPM&CS Munich - Part III - The Storage Problem

Int. Precious Metals & Commodities Show Munich  -  PART III
Int. Edelmetall- & Rohstoffmesse München  - Teil3

 

 I did write a few lines on the traders in my last post. After you selected one of those traders and started to buy some precious metals, new questions arise:  how and where to store it?

 

Just think about yourself. Lets assume, you put 10 % of the assets you own into gold or silver. For the sake of the argument, lets say that is 20.000 EUR. All in Gold, that would be ~15 oz of gold. And in silver: 31 USD / oz at 1.29 EUR/USD >> so somewhat less then 850 oz  or below 30 kg.

 

You really want to store that in you flat / house? Well, I guess, this is doable. Its only 10 % of your worth - so if you loose it (to your maid, burglars, party guests stumbling over it) you still stay alive. May be you even want to have that amount at immediate access - just in case.

 

When the numbers rise, sooner or later you do not want to store that at home. So what next? You took physical delivery in first place, because you did not want any risk from counter-parties. So no ETF, funds, etc ... rather physical delivery.

 

Not wanting to store under your pillow, the bank vault is the next step. Its quite anonymous; you don't have to tell the bank what you store ... just make sure you do not store more than the insurance covers.
But what happens in worst case: will the vault be accessible in case of bank holidays? Just imagine: nobody can take money from his accounts. People line up. Now you step in. Maybe you get your coins and bars ... and then you want to exit and move through the angry crowd?
Or maybe you do not get your precious metals! As banks have been told to make the bank holiday a holiday for everybody! So all vaults may be frozen ....

What (mostly) Swiss companies offer here: Store in the Swiss mountains (some of them offer that literally).

Approach I: non-allocated storage in a customs-free zone (in Switzerland).
What you can do here is buy gold or silver in a lump-sum or over time. You will get some discount here, as the provider buys huge lots and not a coin here and there. And being in a customs-free zone, there is no VAT (on silver; gold is tax free anyways). 

On the upside: safe storage, not linked to a bank, out of the European Community, guaranteed take-back of you metalls.
One of the sales guys started to speak about a traceless transfer (no emails, no paper sent to your address) without me asking. Guess that is a standard question they get.

The cost: you pay an agio (0 to 5 %), storage fees per anno (1 - 2 %), and sell fees (1 - 2 %). 

 

Approach II: allocated storage at such companies.
I asked about that, and it looked like they are not really prepared for it. You can do it, fees will rise. But the minimum amount is rather high (1 CHF mn) - and the main problem they mention is the seperate storage rooms needed. 

 

Apporach III: vault from private companies.
Here you get storage in a vault - its no longer in a customs-free zone. But you can access it just as a vault at your local bank. So whatever you put in or out - it is your business. Still they offer you to buy and sell metals, as they have a link to a retailer. So you can call them or buy online, drive their, take the stuff from them and place it immediately into your vault. (You get 2 keys, can leave on with them or take both with you - and you will need both to open the vault.) 

And (mentioned without asking): after 3 years they accept paying for the vault in cash. Price: ~750 CHF per anno, but depending on the size. You can go up to storage places for 1 ton. 

All the concepts have so far been alien and new to me. To really get a picture, I guess it will be necessary to do some more research. One of the companies - Mida - will be presenting in the next weeks here near Munich. Guess I will take a look on how much attention they will get at that event.

 

... more to follow ...

IPM&CS Munich - Part II - The (Coin) Traders

Int. Precious Metals & Commodities Show Munich  -  PART II
Int. Edelmetall- & Rohstoffmesse München  - Teil 2

I got notice of the PM&CSM via    pro aurum    and, being a customer, they also sent me 2 free tickets for Friday.

Guess we had a pretty nice line-up of such companies: the magazine of the show lists  15+ precious-metal and coin traders, most of them German, some Swiss and Austrian. Maybe I did know 3 or 4 of those names so far and even some of the bigger booths were unknown to me. Sure those traders always make up for a nice show: shiny coins and bars behind glass, security here and there, sales guys and gals ...

I really did not notice the amount of trading going on on Friday. But obviously EUR where changed to 'real money', gold and silver, coins and bars, left and right. Did see a lot more of that on Saturday.  It is kind of strange, when you see a guy in T-shirts and washed-out jeans handing over a 500-EUR-note in  an overcrowded environment and receiving a stack of silver coins for it. And you can just take you camera out and film the whole transaction ... 
People coming to the booth and discussing the delivery of 10 coins, only 1 piece from each country ... this one they got. that one is sold-out ... all the discussions and hand-overs taking place in a semi-private environment.

Guess 95 % of the folks visiting the show are 'retail customers' - so the guy like you and me, private investors, putting some k EUR here and there.  I can really see, why it makes sense for the coin/retail traders to be on the show. They make some business there, but mainly they make their name known. Next time I want to buy some physical coins, I will check on alternatives to my broker. I am quite sure, it will not be worth-while to change, but at least I will check. 
And for the total new-comer to the world of buying gold and silver - guess these traders can attract some business.

So: who did well in presenting himself? (this is a very subjective view and me walking on thin ice)
Degussa - huge booth, shiny, guess 90 % of all visitors used a free bag from them to collect show papers and hand-outs
pro aurum - nice booth, but nothing compared to Degussa, on the plus side some key note speakers mentioning their support
And the rest of the field - with Münze Österreich (just put 10 girls into these stylish Maria-Theresia-costumes on the next show instead of one and you really make an impact), and ReiseBank (booth placed on a strategic location just exiting one of the presentation rooms and big enough to get attention, never heard of them before) leading.

... more to follow ...
 

IPM&CS Munich - Part I

Int. Precious Metals & Commodities Show Munich  -  PART I
Int. Edelmetall- & Rohstoffmesse München  - Teil 1

 

The IPM&CS Munich took place on 2nd and 3rd of November at the Event Arena in Munich, loacted at the fields of the Olympia Park. The place was used for in-door bicycle-races - it is now a 2-story oval building, giving space for 3.000+ visitors. If I got it right, the show was conducted the 8th time in Munich, but - shame on me - I visited it the first time.

We had 2 days of nice weather in Munich. I was early on both days, interested in how many and what kind of people would show up. On Friday - just between the weekend and a public holiday in Bavaria - people lined up to get in. Well - this is common for Munich at almost any place; you better get reservation here on whatever you plan. Opening up some 20 minutes after the indicated time, who wonders we had people lining up to get in. (Kind of guerrilla marketing: provide only 20 pairs of the newest running shows, and who would not expect them to be sold out after 30 min?) Well, at the end: It sure provided for some nice pictures and nobody will know how you 'created' the line-up.

On Saturday, waiting in perfect morning sun light sipping a cup of free coffee,  the crowd was a little bit smaller (Surprise - everybody had a day off ... why smaller - well doors opened in time now).

Not really sure how that compared to previous years, the top presentations for sure were overcrowded, not having enough seating available. Guess, that's the same picture on most shows - organizing one of them, I would make sure there is not enough seating.

Speaking about presentations: we had 2 days of them in 3 halls/rooms ranging from 20 min (mostly company presentations) to  50 min (with some very prominent key note speakers).

On the show, we had several banks / banking institutions, precious metal / coin traders, coin and bar producers, intelligence/report providers, institutions selling PM funds, uncommon stuff (like silver art), and a whole lot of expoloration/mining corporations (gold, silver, but also other stuff like platinum, uranium, and so on). 

I did not really prepare for the show --- just went there, breathing the atmosphere, listening to presentations, watching who attends the show. Took it as 2 holidays with alternative brain feed. Giving my background, given all the information I soaked up in recent years, some of the stuff, some of the companies looked really familiar. Guess I had no big 'WHOOW' event here on my side - no new data, no new concept --- but still a whole lot of impressions, side aspects, vivid pictures behind the guys whose articles I read.

I will try to categorize the impressions and data in my next postings. Writing will help me to think about it, categorize impressions and information, think about the input, process it, get a picture. and eventually share it with you.

VAT on Silver Coins

German state is looking for new ways to tax its people all the time. Surprisingly the Wirtschaftswoche reports in its latest issue, that plans for a hike on VAT on silver coins from 7 to 19 percent have been postponed.

Plans? Ever heard about that? Red in the papers? Seen on television? Not me ...

Silver bars are already taxed with 19 % VAT today. So if you use them as an 'investment vehicle' (read: a store of value not to be inflated away by politicians printing more and more fiat mney), you have to bet on a 20 % increase over time. Silver coins have been comparable cheap - 7 % VAT so far.
For both products you do not owe capital gains tax, if you sell them after holding a year or more.

Gold - up to now - has been treated similar to paper money and there is no VAT nor a capital gains tax on it.

How quickly things may change is demonstrated in Austria: holding real estate for more than 10 years and gains would have been exempted from capital gains tax (like in Germany). Not any more - since April 2012 there is only an exemption if you currently live or have lived in the estate for several years.

What steps come next? VAT raise on silver coins? VAT on gold? Hah - i have got the idea: VAT on paper money! Single problem: we most give it a different name, as we cannot expect paper money to 'add value'. How about a 19 % transfer tax on all the fiat money you get transferred - physically or electronically? This would give nations burdened by debt finally a break. At least for one or two years ...

Internationale Edelmetall- & Rohstoffmesse - International Precious Metal & Raw Material Fair

At November the 2nd & 3rd the Internationale Edelmetall- & Rohstoffmesse will take place in Munich, Germany.

The list of companies present at the fair is available now and there will be interesting presentations on both days. I will do my best to be present on both days.

Follow the link!

The Magnitude of the Mess We're In

I found a real top story in the opinions section of the Wall Street Journal: The Magnitude of the Mess We are in.

Unfortunately, this is not only affecting the USA.

GOLD at all-time-high

Just noticed, we are at all-time-high at 1.380 EUR / oz.

Another one to think about ...

- US will not tolerate Iran becoming a nuclear power (latest Obama speech)
- biggest naval exercises ever are conducted in the Streets of Hormus
- Israelian trash-talk on Iran was never worse
- tensions between China, Japan and Taiwan about some neglect-able islands rise

Oil prices are going to ????

And now for something completly different ...

These days i got a notification from comdirect on 'comdirect Wechselgeld sparen' ('comdirect save change').

The deal is:
- for every payment you do with your comdirect VISA card, they will round up the amount to a whole EUR (so if you fill up your tank for 70.01 EUR as you did not hit the 70.00 number, as you usually try, they will charge you 71 EUR)
- the excess amount will be transferred to your Tagesgeld-Konto (call money account), which has a yield of appr. 2 %
- so your Griokonto (checking account) will be charged somewhat higher, but the difference goes to your interest earning call money account
- for the first 3 months, they will double every EUR transferred to your call money account that way after 3 months (read: you get a 100 % bonus on such transfers from your left to your right pocket; and you will get it after 90 days after the transaction happened - or at the next accounting run after 90 days - have not seen the details on that one)
- afterward this 3 month they will add 10 % to every EUR transferred that way after 3 months (read: the bonus drops from 100 to 10 %)

To me, this sounds like a deal. Where can you get 100 % or 10 % interest nowadays? And: I can always transfer the money from my call money account back to my checking account. It is really just left pocket to right pocket. I have no transaction fees. No time delay ...
While I will not get rich on this or secure my old age pension - millions of transactions could impact the earnings of comdirect. So I doubt, they really have to pay for all this.

Question (and I am totally sure 100 % of readers can provide speculative answers on that one and I expect such multi-line comments on the blog by all of you!):
- why does comdirect offer this?
- is it just to boost turnover with their own VISA cards?
- or can they make up for the costs of doubling / adding 10 % to such transfers by earning interest, getting refunds from VISA, etc?
- just explain the (possible) business case behind that offer to me

Awaiting your postings !

PS: I will write comdirect Investor Relations a question regarding the thinking behind this offer. If they answer, we can compare your comments to their answer.

Morphosys

We did speak about 10-year-highs lately. With Morphosys, we have a stock that just made a +10 % jump to new all time highs on Friday.

Morphosys is one of the stocks I watch since years. Its business modell is split into 3 parts:

- (1) solid cash stream from the proprietary anti-body library
- (2) partnering with pharma companies all over the world using the human anti-bodies technology to develop new pharmaceuticals
- (3) developing own pharmaceuticals

While (1) provides solid cash flows, (2) can be very profitable. If companies like Novartis would develop a new blockbuster with the anti-body-technology, Morphosys would get a percentage of the turnover. And the definition of a pharmaceutical blockbuster is: 1 USD bn turnover a year or more.

Even if those pharmaceuticals would never hit the market, Morphosys is entitled to milestone-payments in the process of development.
Well, I gained a little knowledge on development of pharma products: this is a process, where only a very small number of possible candidates will finally become a product. And it has not only to do with the management quality of the company. Once you have developed the substance, you have to go through several test phases. Demonstrate that the product does no harm; that it has positive effects on the illness you want to treat. Increasing number of participants in the studies. Higher costs with each step. But also increasing likeliness for success. Phase 0, Phase 1 ...  and so on - each phase regulated by drug authorities.
And Morphosys would get payments for each development stage achieved by one of its partner companies.

The real leverage is (3), where Morphosys uses the cash from (1) and (2) to develop its own pharma product with its own technology. It will perhaps never be able to market it, like a Pfizer, a Glaxo or a Bayer. But having developed it, it could be sold for a huge number to big pharma.

Downside: as long as there is cash from (1) and (2), Morphosys can go on with R&D. And the cash stream from (1) and (2) is getting higher by the years, Morphosys having set aside USD 100 mn. This alone would be good enough for 5 to 8 years of proprietary development. So there is no downside, as long as they have ideas for further development.

Upside: they hit something big.

On Friday they announced Phase 1b/2a results of their MOR103 project. MOR103 was safe and had no harmfull side-effects. The project has the potential to become one of the first drugs against rheumatoid arthritis (RA), which is harming millions of people.
Stocks did rise by 15 % on Friday.

MOR103 has a higher chance to fail than to succeed. That's the way it is with drug development. Morphosys has not only one project, but several ... Still the stock is like a lottery ticket. Maybe they hit big - who knows.
Difference to so many BioTech start-ups is: they are funded and will stay funded. Their business model provides cash flow - and you are not getting harmed by stock dilution. So: little downside.

I got my lottery ticket. How about yours?

10-year Highs

Did you worry about 10-year highs latetly?

Given the circumstances, I guess you did not. We have a EURO-crisis just in front of us. EZB is throwing paper on us and calling it money. US is not growing fast enough, so the FED opted for QE3. Emerging countries growth rates disappointed lately. And in China 1/3 of the public listed companies reported negative cash results for Q2 2012.

Sounds like a vibrant economy.

So, how many of the DAX30 companies are close to 10 year-highs today?

How many of the DOW30?

How close are DAX30, DOW30 and S&P500 to 10 year-highs? 10 %? 25 %? 50 %?

Adidas - Basf - Bayer - FMC - FMCE - Henkel - Linde - SAP - VW ... why are they all close to 10 year highs?

Disney - Home Depot - Honeywell - IBM - Verizon - WalMart ... why are they all close to 10 year highs?

Reality Check!

It's more important to know where the market moves then why the market moves.

EZB decission destabilizes FX markets

ECB decided last week on buying 'unlimited' amounts of short-term bonds to address distortions and 'unfounded' fears of investors about the survival of the EURO. Only the German Bundesbank and his head Jens Weidmann objected to the plan. The operation will address the secondary market, not buying troubled / toxic bonds from the PIGS and other stressed countries directly. 

The announcement led to a spike in European stocks, with the DAX closing above 7.200 on Friday; the EuroStoxx50 above 2.500; the Swiss Market Index SMI above 6.500, and a rise of the FTSE from 5.650 to 5.800 at the end of the week. The DOW30 is clearly above 13.000 now and the S&P500 continues its way to 1.500 ...
This all, despite worsening economic outlook around the globe.

Gold jumped to 1.735 and is on the rise again. The consolidation form the last peak above 1.900 USD lasted above one year and the metal seems to gain momentum again. Silver also spiked to 33.6 USD - gaining 10 % in the last 10 days.

So far you can argue that the markets had not discounted all the additional liquidity from the ECB move and made up for it on Thursday and Friday. With a move that will clearly push inflation up, this seems logical - and you never know who did bet on Draghi's announcement before the fact and who jumped the train when he was leaving the station. 

It gets a little bit weird when you look at the USD/EUR ratio, which jumped to 1.2815. Comments here state an increased trust in the EURO  and weak US labor market data. Well, you can understand those arguments per se. But together with rising stock markets the make less sense.

Even more astonishing was the move of the Swiss Franc (CHF) to me. In recent month it was kept close to 1.20 CHF/EUR by massive intervention of the Swiss National Bank (SNB). Estimated EUR 50 to 100 bn where bought by the SNB each month in order to keep the 1.20 ratio established. This lead to a huge spike in foreign currency reserves of the SNB. Recently comments on how long this procedure can be kept up got more vivid.

It is unclear, what led to the CHF jump above 1.21 vs. the EUR at the end of the week. One reason could be that money left the CHF as trust in the stabilization of the EURO-zone did rise. Ohter reason would be, that the pressure on the SNB to buy EURO was lifted somewhat by the EZB comments and following expectations of the market.
In that case, it was maybe a wise move of the SNB not to start selling EURO immediately but let the CHF get awy from the 1.20 limit set. If the market could drive the ratio to lets say 1.25, the SNB could even take some profit from the intervention - starting to sell EURO at such a level.

One other think I am always a little bit worried about: When markets move fast, at a weekend - and with all the manipulation from governments we have to live with nowadays - can the regulators and bureaucrats act fast enough? We know that the EU summits are often on weekends, so  that markets are not directly influenced. Decisions have to be made, before Monday morning Asia starts to trade.  
But are there really SNB bankers with authority to change the trading strategy available Friday afternoon, when New York is still trading? Or can the market catch them off guard?