Economics

UN Releases 2013 World Drug War Report

"I found this paragraph absolutely stunning: 'We have to admit that, globally, the demand for drugs has not been substantially reduced and that some challenges exist in the implementation of the drug control system, in the violence generated by trafficking in illicit drugs, in the fast evolving nature of new psychoactive substances, and in those national legislative measures which may result in a violation of human rights. The real issue is not to amend the Conventions, but to implement them according to their underlying spirit.' Read that again and realize the enormity of what he is saying." Continue reading →

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Silver Demand Surges In India While Gold Premiums at $35/oz In China

"Attempts to prevent Indians from buying gold are contributing to them buying poor man’s gold, or silver. There has been a massive increase in silver demand in India in recent months and the government's meddling and controls in the gold market will likely led to even more demand for silver. While India imported 1,900 tonnes of silver in 2012, in the first five months of 2013 alone, imports have touched 2,400 tonnes. According to industry estimates, silver imports during the January-March quarter stood at 760 tonnes. Imports shot up 720 tonnes in April alone, and in May, they further swelled by 920 tonnes." Continue reading →

Continue ReadingSilver Demand Surges In India While Gold Premiums at $35/oz In China

Bill Bonner: No Real Recovery Without “Hitting Bottom” First…

"The fireworks in the gold market are still, probably, far ahead. You'll hear the explosions when consumer prices begin to rise. And that won't happen for a while. And here is where the story gets interesting... and hard to follow. The bond market has turned. This could push the economy into a deeper funk unless growth starts to pick up. But it could be years before the new trend is firmly established. We remember the last turn... in the early 1980s. Paul Volcker announced it in 1979. But it was almost four years before investors fully absorbed the news." Continue reading →

Continue ReadingBill Bonner: No Real Recovery Without “Hitting Bottom” First…

How to Survive When Prices Double Every Day and a Half

"At a 2011 Casey Research Summit, I met and heard the firsthand accounts of three gentlemen from Zimbabwe, Argentina, and Yugoslavia, who had survived hyperinflation in their home countries. Although these may sound like exotic locales with foreign problems, their terrifying histories have a lesson to teach us. Hyperinflation is like fire. We all install smoke alarms, keep fire extinguishers handy, and buy insurance to protect our homes, but most of us will never fall victim to an unplanned fire. However, when a fire does ignite, it can be catastrophic – which is why prudent people simply plan ahead." Continue reading →

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Bill Bonner: Why the Sell-Off in Gold is Good News

"Gold is giving us another good opportunity to buy a life vest before the boat sinks. No market goes up without a correction. Speculators typically get ahead of themselves. They need to be slapped around a bit... tested... and tempered. Like a steel blade, they need to be hammered before they are ready for the final battle. In the last major bull market in gold the gold price rose from $40 to over $800 an ounce. This was one of the greatest bull markets of all time. But it wasn't without its challenges. The price of gold moved up fast. It needed to be knocked down at least once before it finally reached its top. Gold fell by 47% before rising eight times to its peak in 1980." Continue reading →

Continue ReadingBill Bonner: Why the Sell-Off in Gold is Good News

A million engineers in India struggling to get placed in an extremely challenging market

"Somewhere between a fifth to a third of the million students graduating out of India's engineering colleges run the risk of being unemployed. Others will take jobs well below their technical qualifications in a market where there are few jobs for India's overflowing technical talent pool. India trains around 1.5 million engineers, which is more than the US and China combined. However, two key industries hiring these engineers -- information technology and manufacturing -- are actually hiring fewer people than before. Frustrated engineers are taking jobs for which they are overqualified and, therefore, underpaid. A few exceptions have even turned to crime." Continue reading →

Continue ReadingA million engineers in India struggling to get placed in an extremely challenging market

Honduras Startup City Redux: from RED to ZEDE to … Freedom?

"The legislation triggered fierce opposition by municipalities, which feared competition. Those objections were answered in floor debate by the observation that municipalities could themselves convert to ZEDE, winning all the same advantages. On June 12, 2013, the ZEDE legislation passed by a vote of 102 to 26. In broad terms, the ZEDE legislation authorizes the creation of startup cities that will operate under the supervision, but not direct control, of the central government. The ZEDE might not sound much different from China’s special economic zones or Dubai’s International Financial Centre, but the Hondurans have authored a daring new approach to governance." Continue reading →

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EMC raises $5.5bn via corporate bonds to fund share buybacks

"The sharp shift in Treasury yield rates over the past few weeks means time is of the essence for those companies looking to undertake a capital return program and fund it with bonds. The rate rise increases the cost of funding and limits the ability to take advantage of an arbitrage between the current lower cost of issuing debt versus paying dividends on shares they could otherwise buy back with the fund raising. 'There is the obvious arbitrage there,' said one head of debt capital markets at a Wall Street bank. 'Why pay a dividend in the 3% to 5% range, when you can issue bonds at 2% or less and buy back those shares?'" Continue reading →

Continue ReadingEMC raises $5.5bn via corporate bonds to fund share buybacks

Euro Pacific Capital Global Investor Newsletter – June 2013

"The central premise of Abenomics seems to be that the Bank of Japan could succeed in pushing inflation up to 2% without raising the rates on long-term debt. To do this, one would have to assume that bond investors would accept negative interest rates, even while a falling yen was eating away at principle. Such an outcome is not consistent with demonstrable human behavior. If the investors didn't play ball, it was assumed that the Bank of Japan could step up their quantitative easing and buy the bonds that investors were rationally selling. But the BoJ is already buying 70% of the new government debt." Continue reading →

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Sitka Pacific Capital Management Client Letter, May 2013

"In many respects, the market action over the past 2 years — in stocks and gold — seems to reflect a misunderstanding of how periods of monetary expansion affect consumer prices and asset prices. In the pages that follow we’ll highlight a few of these monetary expansion/inflation misunderstandings, and we’ll explain why equity investors should be growing more pessimistic — not optimistic — in light of current market valuations and the Fed’s continued quantitative easing." Continue reading →

Continue ReadingSitka Pacific Capital Management Client Letter, May 2013