Author Archive

Message To all Gold Mining CEOs – A Gold Mining Predicament

The main GDX gold mining index is down 37.4% YTD and down 54.4% since the 2011 peak. It is a very sorry state of affairs.

 

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Crisis, what crisis?

Three words that helped bring down the last Labour government in 1979, even though the man generally thought to have uttered them – Jim Callaghan – did not in fact do so. But the Sun journalist who fashioned that headline caught the popular impression of a government unaware of a very serious state of affairs which had sneaked up on it.

 

Crises are not often seen or predicted prior to the event. Despite the world now full of “experts” who fully predicted the 2007-08 crisis and hundreds of books on the matter, there were very few real visionaries. Most if not all of them were much maligned at the time and often dismissed as crackpots.

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Board up your windows, the Budget cometh

Sources in Whitehall are reportedly looking into the re-introduction of the Window Tax 162 years after it was repealed. With the UK government hell-bent on austerity, it has positioned itself as the proverbial ‘canary in the coal mine’, and is in dire need of ways to balance its books. However, the canary died long ago. It seems that other countries have taken note, moving away from austerity to more growth-focused measures, while the UK ploughs ever deeper in to the gas-filled mine. The resurrection of the Window Tax – along with other draconian measures – are back on the table as the UK tries to galvanize its economy and return the fiscal situation to a sustainable path.

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Is it Safe . . . . ?

Anyone who has seen the 1976 film Marathon Man will no doubt recall the cringe-inducing scene where a sadistic Nazi dentist (played by Laurence Olivier) tortures the protagonist (Dustin Hoffman) by drilling into his teeth without anaesthetic. Throughout the ordeal, Olivier repeatedly asks, “Is it safe?” Not knowing what “it” refers to, Hoffman is unable to come up with an answer to avert the torture.
 
I couldn’t help thinking of this scene in the movie and the constant question, “Is it safe?”, without relating it to the current investment climate. It is over 5 years since the eye of the last financial crisis, with stock markets almost back to their 2007 highs, while gold struggled. It must be safe, right?

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Risky, Riskier, and the Riskiest

Is now the worst time to invest?  I would go further and argue there has never been a riskier juncture in the history of investment at which to put money to work.
 
Let’s take a quick look at some of the typical choices.
 
Corporate bonds. These, on an outright basis, have never offered such a low yield. Implied company-default rates are almost preternaturally low, thus almost certainly not reflecting reality.
 

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